The Evolution of Collective Strategies in SMEs’ Innovation: A Tripartite Game Analysis and Application

Abstract

Financing difficulty is recognized as the main bottleneck in the technology innovation process of small- and medium-sized enterprises (SMEs). The governments generally provide financial support for SMEs’ innovation activities. Numerous research studies have been conducted on the role of the government in enterprises’ innovation, while there is no consistent conclusion on whether government subsidies can improve stakeholder collaboration and effectively ease financing constraints of SMEs’ innovation. Due to information asymmetry and the bounded rationality, the dynamic game among the government, external investors, and SMEs has the characteristics of complexity. This paper aims to explore the collective strategies of the major stakeholders in SMEs’ innovation and investigate the effect of antecedents on innovation activities. We establish a trilateral evolutionary game model on the relationship among the government, external investors, and SMEs. The simulation results show that the evolutionary system converges quickly to the equilibrium; when the government subsidies decrease, the external investors’ appraisal costs decrease and the investment amount and return rates of external investors increase. Furthermore, under the condition of government subsidies, external investors will not change their investment strategies even if the external investors’ recognition costs have exceeded their return on SMEs’ investment. The findings can provide good reference for the government to solve the financing problem of SMEs’ innovation.

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