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Industry dynamics in complex product spaces: An evolutionary model

  • Marengo, Luigi
  • Valente, Marco

In this paper we present an evolutionary simulation model of industry dynamics with product innovation and differentiated demand in complex product industries, i.e. industries where products are made of many components, possibly belonging to different technologies, and providing a variety of services to consumers who have heterogeneous preferences. We analyze how the complexity of the product space, the strategies that firms follow to search this space either innovating or imitating, and the differentiation of consumers' preference interact to determine the structure and evolutions of the industry.

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Article provided by Elsevier in its journal Structural Change and Economic Dynamics.

Volume (Year): 21 (2010)
Issue (Month): 1 (March)
Pages: 5-16

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Handle: RePEc:eee:streco:v:21:y:2010:i:1:p:5-16
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/525148

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  1. Luigi Marengo & Corrado Pasquali & Marco Valente & Giovanni Dosi, 2012. "Appropriability, patents, and rates of innovation in complex products industries," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 21(8), pages 753-773, November.
  2. Paul Windrum & Chris Birchenhall, 2005. "Structural change in the presence of network externalities: a co-evolutionary model of technological successions," Journal of Evolutionary Economics, Springer, vol. 15(2), pages 123-148, January.
  3. Tommaso Ciarli & Riccardo Leoncini & Sandro Montresor & Marco Valente, 2008. "Technological change and the vertical organization of industries," Journal of Evolutionary Economics, Springer, vol. 18(3), pages 367-387, August.
  4. Frenken, Koen, 2006. "A fitness landscape approach to technological complexity, modularity, and vertical disintegration," Structural Change and Economic Dynamics, Elsevier, vol. 17(3), pages 288-305, September.
  5. Anderson, Simon P & de Palma, Andre & Thisse, Jacques-Francois, 1989. "Demand for Differentiated Products, Discrete Choice Models, and the Characteristics Approach," Review of Economic Studies, Wiley Blackwell, vol. 56(1), pages 21-35, January.
  6. Herbert Dawid & Marc Reimann, 2011. "Diversification: a road to inefficiency in product innovations?," Journal of Evolutionary Economics, Springer, vol. 21(2), pages 191-229, May.
  7. Michael J. Lenox & Scott F. Rockart & Arie Y. Lewin, 2006. "Interdependency, Competition, and the Distribution of Firm and Industry Profits," Management Science, INFORMS, vol. 52(5), pages 757-772, May.
  8. Marco Valente, 1998. "Laboratory for Simulation Development," DRUID Working Papers 98-5, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  9. Luigi Marengo & Giovanni Dosi, 2003. "Division of Labor, Organizational Coordination and Market Mechanism in Collective Problem-Solving," LEM Papers Series 2003/04, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  10. Saviotti, P. P. & Metcalfe, J. S., 1984. "A theoretical approach to the construction of technological output indicators," Research Policy, Elsevier, vol. 13(3), pages 141-151, June.
  11. Carliss Y. Baldwin & Kim B. Clark, 2000. "Design Rules, Volume 1: The Power of Modularity," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262024667, June.
  12. Steven Klepper & Peter Thompson, 2006. "Submarkets and the evolution of market structure," RAND Journal of Economics, RAND Corporation, vol. 37(4), pages 861-886, December.
  13. Winter, Sidney G., 1984. "Schumpeterian competition in alternative technological regimes," Journal of Economic Behavior & Organization, Elsevier, vol. 5(3-4), pages 287-320.
  14. Pier Saviotti & Andreas Pyka, 2008. "Micro and macro dynamics: Industry life cycles, inter-sector coordination and aggregate growth," Journal of Evolutionary Economics, Springer, vol. 18(2), pages 167-182, April.
  15. Shy, Oz, 1996. "Technology revolutions in the presence of network externalities," International Journal of Industrial Organization, Elsevier, vol. 14(6), pages 785-800, October.
  16. Marco Valente, 2008. "Pseudo-NK: an Enhanced Model of Complexity," LEM Papers Series 2008/26, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  17. Ron Adner & Daniel Levinthal, 2001. "Demand Heterogeneity and Technology Evolution: Implications for Product and Process Innovation," Management Science, INFORMS, vol. 47(5), pages 611-628, May.
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