Competing Through Innovation in Networked Manufacturing

The authors examine how network externalities and various factors shape strategic interactions between manufacturers and technology suppliers in networked manufacturing contexts. Using an evolutionary game model, it explores manufacturers' radical vs. incremental innovation choices alongside suppliers' technology authorization vs. licensing strategies. The results show that both parties' strategies often fluctuate without stabilizing under different initial conditions. While higher returns from radical innovation motivate manufacturers toward breakthrough efforts, suppliers consistently favor licensing regardless of profit-sharing adjustments and are highly sensitive to radical innovation costs. In contrast, changes in licensing fees predominantly influence manufacturers' behaviors. Collaboration costs only lead to minor shifts in evolutionary trajectories.