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Policy simulation of firms’ cooperation in innovation

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  • Almas Heshmati
  • Flávio Lenz-Cesar

Abstract

This study utilizes an agent-based simulation model to conduct a public policy simulation of firms’ networking and cooperation in innovation. The simulation game tests the differences in sector responses to internal and external changes, including cross-sector spillovers, when applying three different policy strategies to promote cooperation in innovation. The public policy strategies include clustering to develop certain industries, incentives to encourage cooperative research and development (R&D), and spin-off policies to foster entrepreneurship among R&D personnel. These policies are compared to a ‘no-policy’ alternative, which serves as a benchmark to verify the gains (or loses) in the number of firms cooperating and networking. The simulation model defines firms’ behavior according to empirical findings from an analysis of determinants of the firms’ participation in cooperation in innovation with other organizations using a Korean Innovation Survey. The exercise indicates possible appropriate policy strategies that can be applied depending on the target industries. We have applied a few examples and showed how the results may be interpreted. Agent-based models are found to have a great potential in decision-support systems for policy makers.

Suggested Citation

  • Almas Heshmati & Flávio Lenz-Cesar, 2015. "Policy simulation of firms’ cooperation in innovation," Research Evaluation, Oxford University Press, vol. 24(3), pages 293-311.
  • Handle: RePEc:oup:rseval:v:24:y:2015:i:3:p:293-311.
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    More about this item

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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