The proposal of a “dual circulation” development pattern is an important strategic move for China to respond to the current changes in the economic situation and promote the high-quality development of the economy. This suggests that Chinese enterprises should rely more on the demand potential of domestic large markets and explore development opportunities in the “dual circulation” development pattern. This paper aims to explore the mechanism and path for enterprises to achieve independent innovation based on the unique advantages of domestic large markets, so as to provide a basis and policy reference for effectively solving the “bottleneck” problem of core technology and building a self-reliant, safe, and reliable independent innovation system.

Based on the matching data of China Industrial Enterprise Database, China Industrial Enterprise Patent Database, and the panel of cities at prefecture level and above in China, this paper discusses the impact of domestic large market advantages on the independent innovation of enterprises. The results show that domestic large markets can significantly improve the independent innovation level of enterprises by reducing their average costs, promoting technology spillovers in the industrial chain, and enhancing the sharing effect of intermediate goods. International markets strengthen the role of domestic large market advantages in enhancing enterprise innovation, thus showing a clear trend of interaction between domestic and international markets at present. The synergistic effect of domestic and international markets on enterprise innovation varies greatly depending on the industry, trade type, domestic and foreign investment type, and patent type of enterprises.

The contributions of this paper are as follows: First, based on China’s unique domestic large market advantages, the impact mechanism of independent innovation is systematically explored, providing a theoretical basis for unblocking the domestic circulation and building new advantages for enterprise innovation in domestic markets. Second, based on the theory of new economic geography, combined with the market potential model and the level of Internet development, new indicators for domestic large market advantages, intermediate product space supply, and industrial chain space technology spillover effects are constructed, providing a quantitative basis for comprehensively identifying the impact of domestic large market advantages on the independent innovation of enterprises. Third, the synergistic effect between the international and domestic markets in the process of independent innovation is further explored, providing policy reference for enterprises to simultaneously utilize both domestic and international markets for independent innovation and help to form a “dual circulation” development pattern.