Abstract: Service industries have higher average profitability than that of manufacturing sectors. This paper firstly builds a two-stage game model of cost-saving innovations and makes the theory hypothesis that the technical service industries’ high profitability mainly comes from the R＆D of corporations, rather than their market power. The empirical test results show that there is a significant positive correlation between R＆D and high profitability, but a significant negative correlation between market forces and high profitability by using the cross-sectional data of 60 technology-oriented service Listed companies. Service companies have not formed universal market forces. Firm size and life are not the primary determining factors of market power. So, the technology-oriented enterprises should pursue the innovation developmental strategy, not the market power blindly.
Keywords: Technology-intensive Services, Profitability, Market Forces, Innovation Bonus
source:Finance & Trade Economics ,No10,2013