Firms’ re-innovation after failure and institutional environment: an evolutionary game theoretical approach

Abstract

Carrying out follow-up innovation activities is significant to encourage firms with failed innovation to improve their innovation quality and sustainable competitiveness. However, the existing studies lack discussion on how to stimulate firms’ re-innovation after failure from the institutional level. To explore the relationship between institutional environment and the behavior choice of firms’ re-innovation after failure, the behavior characteristics of firms’ re-innovation after failure were discussed. A game model between government departments and firms with failed innovation was constructed by using the evolutionary game approach. The stable equilibrium strategies in the process of institutional environment optimization and firms’ re-innovation decision-making after failure were analyzed. Meanwhile, the case of Zhengzhou in China was used to illustrate the theoretical model. Results show that the subjective perception of risk and benefit of re-innovation affects the behavior choice of firms’ re-innovation after failure. The increase of re-innovation income promotes re-innovation behavior after failure and enhances firms’ competitiveness. The improvement of intellectual property protection improves re-innovation income, but the reduction of re-innovation cost has a limited impact on the behavior choice of firms’ re-innovation after failure. The increase of government social welfare benefits promotes the institutional environment construction and firms’ willingness to re-innovate after failure.