Externality of Internet Companies' Scientific and Technological Innovation in the Complete Information Static Game

Abstract

The purpose of this study was to explore in Internet industry whether a company’s R&D choice is affected by other companies’ choices and point out the scope it matters, futher, determine the best R&D strategy on different occasions. The paper established a rectified Cournot model. Based on the traditional model, the paper added two parameters: knowledge spillover effect and knowledge absorptive capacity. The paper argues that the externality of R&D doesn’t exist when the above parameters changes within a certain range. Thus, the paper put forward that the government should strengthen patent protection and supply financial support to encourage R&D. This study innovatively applied rectified Cournot model, and discussed R&D from the microscopic perspective.