Innovation as an Emerging System Property: An Agent Based Simulation Model

The paper elaborates the notion of innovation as an emerging property of complex system dynamics and presents an agent-based simulation model (ABM) of an economy where systemic knowledge interactions among heterogeneous agents are crucial for the recombinant generation of new technological knowledge and the introduction of innovations. In this approach the organization of the system plays a crucial role in assessing the chances of individual firms to actually introduce innovations because it qualifies the access to external knowledge, an indispensable input, together with internal learning and research activities, into the recombinant generation of new knowledge. The introduction of innovations is analyzed as the result of systemic knowledge interactions among myopic agents that are credited with an extended procedural rationality that includes forms of creative reaction. The creative reaction of agents may lead to the introduction of productivity enhancing innovations. This takes place only when the structural, organizational and institutional characteristics of the system are such that agents, reacting to out-of-equilibrium conditions, can actually take advantage of external knowledge available within the innovation system into which they are embedded to generate new technological knowledge. The ABM enables one to explore effects of alternative organizational features of the systems, namely different configurations of the intellectual property right regimes and different architectural configurations of the regional structure into which knowledge interactions take place, on the rates of introduction of technological innovations. The results of the ABM suggest that the dissemination of knowledge favors the emergence of creative reactions and hence faster rates of introduction of technological innovations.