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Demand-Induced Innovation——Evidence from the Chinese Household Appliance Industry
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TitleDemand-Induced Innovation——Evidence from the Chinese Household Appliance Industry  
AuthorLyuTie and Huang Yana  
OrganizationInstitute of Industrial Economics of CASS; 
Key WordsDemand-induced; Market Size; Innovation; Household Appliance Industry 
AbstractAlthough the theory of Demand-induced Innovation has been widely accepted, there is little empirical research on the causality between consumer demand and enterprise innovation. This paper use Chinese Urban Household Income and Expenditure Survey to construct the market size of household appliance, and matched the market size with relevant sectors from China Annual Survey of Industrial Firms. We employ an instrumental variables strategy to solve the endogeneity problem, then establish a causal relation between changes in household appliance market size and innovation activities of corresponding enterprises from 1996 to 2009. The empirical results show that when the household appliance market size increased by 1%, the input of innovation is increased by 0.9%, the output of innovation is increased by 1.2%, and the efficiency of innovation is increased by about 6.6%. Enterprise innovation is closely related to the industrial development phase. We find that the regression coefficient of market size on innovation output is 3 times larger in sunrise industries than sunset industries. In addition, the enterprise's innovation behavior is somewhat advanced, since the future market demand is also an important guide for enterprise innovation. 
Serial NumberWP1288 
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