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The technological transformation of manufacturing industries has created increasingly complex innovation challenges for enterprises (Johansson et al., 2020; Srai et al., 2016), particularly in economic environments characterized by growing network externalities (Dew & Read, 2007; Liu, 2024). Recent empirical studies demonstrate that network externalities are pivotal in shaping innovation outcomes, with firms operating in high-network-effect environments more likely to pursue disruptive technologies (Pittaway et al., 2004). As manufacturing systems become more interconnected and digitally integrated, these externalities significantly influence the direction and pace of technological innovation, shaping value creation and capture in industrial ecosystems (Huang et al., 2020; Podoynitsyna et al., 2013; Ren et al., 2024).
Research further indicates that network externalities accelerate innovation adoption and diffusion, particularly as user bases expand, creating feedback loops that influence innovation trajectories and market dynamics (Papa et al., 2021; Shahzad et al., 2022). These effects are especially pronounced when the value of innovative technologies increases with user base growth, reinforcing feedback loops that shape both innovation pathways and market outcomes (Wang et al., 2023; Zhang & Chen, 2024). Empirical findings suggest that network externalities facilitate faster product adoption and market dominance for early innovators, significantly impacting strategic decisions in competitive markets (Wu et al., 2017). A notable example is Apple’s iPhone, which leveraged network externalities to rapidly gain market share by attracting app developers and users, creating a feedback loop that strengthened its competitive advantage (Agarwal & Kapoor, 2023). Furthermore, rapid technological advancement and intensifying market competition have made the choice between radical and incremental innovation more critical for manufacturing enterprises (Coccia et al., 2017; Ritala & Hurmelinna, 2013). This strategic decision not only affects their competitive position but also shapes the technological trajectory of entire industries (Dahlin & Behrens, 2005).
Traditional technological innovation research has primarily focused on enterprises' internal innovation capabilities and research and development investments (Hu & Yang, 2022; Ketata et al., 2015; Wang et al., 2016), with less systematic exploration of how technology suppliers' strategies influence manufacturers' innovation pathways. As technological innovation evolves, a growing body of literature highlights the role of network externalities in shaping technological choices and market outcomes (Katz & Shapiro, 1985; Shapiro & Varian, 1999). However, under conditions of network externalities, there remains limited theoretical and empirical analysis of how technology suppliers’ dual strategies of technology authorization and licensing affect manufacturers’ innovation choices. While some studies examine technological collaboration and licensing (Arora & Ceccagnoli, 2006; Lerner & Tirole, 2005), the literature lacks a systematic understanding of manufacturers’ strategic selection mechanisms between radical and incremental innovation (Liu et al., 2023; Song & Thieme, 2009; Tian et al., 2023), leaving a critical research gap.