The Modeling of Market Forces Influence on Innovation Performance

This article provides a built and analyzed model of incremental technological innovations implementation which is based on the law of supply and demand. It is illustrated that the development of available technologies leads to the reduction of manufacturing costs, what, consequently, results in the increase of the quantity of manufactured goods and price reduction. However, revenue dynamics and profit margins are less clear, and the decrease after reaching the peak replaces the initial growth. It is proved that innovation performance depends on the slopes of supply and demand curves. Generally, innovation performance goes down along with the decrease of price elasticity of demand, and with the limit on the resources used in production. The proportionality ratio K is derived, and its high values lead to reduced efficiency of incremental innovations implementation.