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Firm size populations modeled through competition-colonization dynamics

Author

Listed:
  • J. M. Applegate

    (Arizona State University)

  • Adam Lampert

    (Arizona State University)

Abstract

The Firm Ecosystem Model is a dynamical model based on the empirical finding that firm characteristics, such as the tendency to innovate and competitive advantages, vary according to firm size. Firm dynamics leading to various population distributions are considered as a competition-colonization scenario in a spatially defined market, where firms of differing sizes are treated as separate species with different competition and colonization characteristics. Smaller firms, given adequate investment funds to innovate, are able to colonize available space more quickly than larger firms, and larger firms are assumed to have stronger competition characteristics and are able to outcompete smaller firms for occupied space. With startup and mortality parameters determined empirically, firm populations reach equilibria dependent on the values of the capital investment parameters. The model predictions provide a good qualitative fit to empirical data from the Business Dynamics Statistics database. Finally, we explore how alternative mortality or investment conditions affect the firm size distributions.

Suggested Citation

  • J. M. Applegate & Adam Lampert, 2021. "Firm size populations modeled through competition-colonization dynamics," Journal of Evolutionary Economics, Springer, vol. 31(1), pages 91-116, January.
    • Handle: RePEc:spr:joevec:v:31:y:2021:i:1:d:10.1007_s00191-020-00703-6
    DOI: 10.1007/s00191-020-00703-6
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    Cited by:

    1. Victor Boussange & Didier Sornette & Heike Lischke & Loic Pellissier, 2023. "Processes analogous to ecological interactions and dispersal shape the dynamics of economic activities," Papers 2301.09486, arXiv.org.

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    More about this item

    Keywords

    Firm dynamics; Firm size distributions; Competition; Ecological dynamics;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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