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Innovation and the Evolution of Market Structure in Complex Industries: An Agent-Based Model Simulation in the Internet Industry

Author

Listed:
  • Vinícius Manhães

    (Universidade Federal Fluminense (UFF), Department of Economics
    Instituto Jones dos Santos Neves, Economic Studies Coordenation)

  • Miguel Vazquez

    (SDA School of Management, Bocconi University
    FSR Global, Clean Energy International Incubation Centre)

  • Ana Urraca

    (Universidade Federal Fluminense (UFF), Department of Economics)

Abstract

Recent technological shifts on the Internet have been largely influenced by the introduction of technologies such as broadband, Wi-Fi, 4G, and 5G which added new capabilities to the Internet, opening new ways for it to be explored by users and firms alike. This paper develops an agent-based model to explore the conditions in which disruptive Internet technologies emerge and its role in the rearrangement of the market. The model replicates the interactions of the main industry agents, including the policymaker. In the baseline setting of the model, we replicate the benchmark for two different scenarios: (i) policymaker oriented to universal access and (ii) policymaker oriented to innovation. The simulation analysis reveals the emergence of two important properties: (i) the introduction of new technologies such as the 5G erodes the entry barriers for content providers and (ii) the more disruptive the new technology, the greater the shake-up of market shares between the incumbents and the latecomers. The experiments also show that although these properties just mentioned are embedded in the model, the policymaker actions can influence their trajectories and the intensity in which they manifest.

Suggested Citation

  • Vinícius Manhães & Miguel Vazquez & Ana Urraca, 2025. "Innovation and the Evolution of Market Structure in Complex Industries: An Agent-Based Model Simulation in the Internet Industry," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 16(6), pages 17994-18014, December.
    • Handle: RePEc:spr:jknowl:v:16:y:2025:i:6:d:10.1007_s13132-024-02557-w
    DOI: 10.1007/s13132-024-02557-w
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    Keywords

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    JEL classification:

    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques

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