Product Innovation and Value Network Formation of Internet Firms Based on Grounded Theory: Experience of the Largest Firm in China

This paper seeks to generate insights into how internet firms engage in a dynamic process of improving product innovation through collaboration between subjects in a value network. Based on the actor-network theory, this paper analyzed the formation, construction and conversion state of the value network. Alibaba is the largest internet company in China. This study applied the grounded theory to 12 product innovation cases of Alibaba and analyzed its primary and secondary data from multiple perspectives. According to the results, three most important factors for internet firms to innovate products include the underlying platform support, user value development and value network realization. Value network realization is the core in the product innovation. For internet companies in China, innovation often follows three stages: the investment stage, the application stage and the diffusion stage. This study adds more perspectives to investigate the product innovation of internet firms. It has anchored on the theories of innovation management and offered guidance for better product innovation of internet firms.