Industry As an Organisation of Agents: Innovation and R&D Management

We present a model of the dynamics of the industry for innovation and R&D management. It is a novel view of the evolution of industry, both in theoretical and computational terms. Industries are seen as organisations of firms and consumers, and the aggregated behaviour is the consequence of the decisions taken by the individual firms. A multi-agent system is designed and programmed to model the industry. The agents are the individual firms and the consumers are represented by the group demands for two products: a new and an old one. The strategic decisions of the firms are the patterns of investment in process and product innovation, and whether to stay or to leave the industry. Agents information and incentives in terms of assets returns are specified. Co-ordination is embedded into the model. We include in the model the relevant ideas from evolutionary economics in the product life cycle context. The model is used to explain and to reproduce the main observed facts in life cycle dynamics, in terms of the rise and fall of incumbent firms, concentration ratios, R&D expenditure and path-dependence in the evolution of the industry. Thus showing the utility of MAS in industrial evolutionary modeling and policy assessment.