Process and product innovations in a monopoly market exhibiting network externality

This paper researches R&D investment problem when a monopoly performs both product innovation and process innovation in market with network externality. Though analyzing both consumer fulfilled expectation and myopic expectation respectively, we find that: (i) standing point of both investment and profit, product and process innovations are complementarity and network externality can´t change this complementary relationship in both types of expectation; (ii) in view of both investment and profit, the complementary degree doesn´t affect by network externality in myopic expectation case, while it increases with network externality intensity in fulfilled expectation case; (iii) the complementary degree in fulfilled expectation case is higher than in myopic expectation case; (iv) the optimal product (or process) innovation effort and profit are higher when the market exhibits network externality than not in both expectation cases.