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A Computational Model of Technological Innovation at the Firm Level

Author

Listed:
  • Daniel Teitelbaum

    (Carnegie-Mellon University
    Bios Group, Inc.)

  • Hadi Dowlatabadi

    (Carnegie-Mellon University)

Abstract

The factors which speed and slow technological innovation have been of interest to policy makers since at least the mid 1960's. Since that time, many theoretical models of innovation at the firm level and at the industry level have been proposed. Due to limitations in computational complexity, nearly all of these models have assumed a single, representative firm type. Very few have systematically investigated the implications of markets with a variety of firm types. With increases in computing power and the advent of agent-based modeling, interactions between agent types can now be explored. In this paper, a computational model of innovative firms in competitive markets is presented. Firms devote resources to R&D which can lead to new, improved products allowing firms to steal market share from their competitors. Two types of firms, differentiated by the strategies they use in pursuing new innovations, are allowed to coexist. One type pursues exclusively radical innovations, while the other pursues exclusively incremental innovations. It will be demonstrated that under certain conditions, a synergy exists between firms of different types which allows heterogeneous populations of firms to earn more than homogeneous ones.

Suggested Citation

  • Daniel Teitelbaum & Hadi Dowlatabadi, 2000. "A Computational Model of Technological Innovation at the Firm Level," Computational and Mathematical Organization Theory, Springer, vol. 6(3), pages 227-247, September.
    • Handle: RePEc:spr:comaot:v:6:y:2000:i:3:d:10.1023_a:1009689418548
    DOI: 10.1023/A:1009689418548
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    References listed on IDEAS

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    1. Zvi Griliches, 1998. "Productivity, R&D, and Basic Research at the Firm Level in the 1970s," NBER Chapters, in: R&D and Productivity: The Econometric Evidence, pages 82-99, National Bureau of Economic Research, Inc.
    2. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74(2), pages 132-132.
    3. Jeremy C. Stein, 1997. "Waves of Creative Destruction: Firm-Specific Learning-by-Doing and the Dynamics of Innovation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 64(2), pages 265-288.
    4. Schmookler, Jacob, 1962. "Economic Sources of Inventive Activity," The Journal of Economic History, Cambridge University Press, vol. 22(1), pages 1-20, March.
    5. Cohen, Wesley M & Klepper, Steven, 1992. "The Tradeoff between Firm Size and Diversity in the Pursuit of Technological Progress," Small Business Economics, Springer, vol. 4(1), pages 1-14, March.
    6. Joshua M. Epstein & Robert L. Axtell, 1996. "Growing Artificial Societies: Social Science from the Bottom Up," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262550253, April.
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    Cited by:

    1. Brian W. Kulik & Timothy Baker, 2008. "Putting the organization back into computational organization theory: a complex Perrowian model of organizational action," Computational and Mathematical Organization Theory, Springer, vol. 14(2), pages 84-119, June.
    2. Matthew Oldham, 2018. "How fast to run in the Red Queen race?," Intelligent Systems in Accounting, Finance and Management, John Wiley & Sons, Ltd., vol. 25(1), pages 28-43, January.
    3. Cevikarslan, Salih, 2013. "Heterogeneity in innovation strategies, evolving consumer preferences and market structure: An evolutionary multi-agent based modelling approach," MERIT Working Papers 2013-019, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).

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