The Impact Of Buyer Power On Upstream Enterprise’s Technology Innovation

With the increasing refinement of enterprise’s division and the more frequent of information communication, the relationship between the industrial chain upstream and downstream enterprises become more and more closely. To achieve from the raw material to final product, there are lots of cooperation with the upstream and downstream. Similar to the decisions of price and output, the innovation of the enterprise activity is no longer a single enterprise’s behavior, but affected by industrial chain upstream and downstream enterprises in common. And the buyer power as one of the focus study of industrial organization in recent years has an important influence on the upstream enterprise innovation strategy. Therefore, from the angle of industry chain vertical relations, we will based on the analysis of upstream enterprise’s impact innovation decision on downstream enterprises’ production costs to investigate the impact of the buyer power on upstream suppliers technology innovation decision. We will discuss the impact of buyer power on upstream enterprise’s technology innovation decision under the homogeneous product Cournot competition and Bertrand competition, in order to reveal the how the different competition pattern will affect the buyer power effect. Upon the previous studies, we targeted investigation the impact of buyer power on upstream enterprise’s decision under the Cournot competition and Bertrand competition when the final products of downstream enterprise are differenced. The research of this paper belongs to the basic problem of the industrial organization theory vertical relationship. Our research results can explain the strategic behavior of innovation decision of upstream enterprise on the one hand; it can also provide certain theoretical basis for industry competition policy on the other hand.There are seven research parts altogether in this paper. For respectively:introduction, literature review, the technological innovation decision of upstream enterprise under Cournot competition, the technological innovation decision of upstream enterprise under Bertrand competition, the technological innovation decision of upstream enterprise under product differentiation, numerical simulation and case analysis, and the conclusion and prospect. Specifically, this thesis mainly completed the following work:(1) Based on the study of a large number of literature, we summarize and evaluate the concept and classification of technological innovation, the influence factors on upstream enterprise’s technology innovation, the concept and influence of the buyer power, the impact of buyer power on the upstream enterprise’s process innovation and product innovation. And upon the analysis of theory and practical background, we put forward the main study problems of this paper.(2) We set up the cost function of upstream supplier’s technology innovation and the production cost function which influenced by upstream innovation decision firstly. Then we revealed the impact of buyer power on the upstream enterprise’s technology innovation decision under the homogeneous product Cournot competition and Bertrand competition, and analyzed the related balanced results.(3) Based on the conclusion of downstream homogeneous product competition, we introduce the product differentiation competition situation into the model, and then respectively inspected the impact of buyer power on the upstream enterprise’s technology innovation decision under Cournot competition and Bertrand competition.(4) Through numerical simulation and comparison analysis, reveals the different impact of buyer power on the upstream enterprise’s technology innovation decision under the different competition mode and different product form. And then, we explain the decision mechanism of upstream enterprise technology innovation in the actual case through the research conclusion.At last, we summarized the research conclusion of this paper; confirm the main theoretical contributions, and further points out the future research direction of this paper.