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Policy Simulation of Firms Cooperation in Innovation

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  • Heshmati, Almas

    (Centre of Excellence for Science and Innovation Studies (CESIS), & Department of Economics, Sogang University)

  • Lenz-Cesar, Flávio

    (Ministry of Communications, Esplanada dos Ministério)

Abstract

This study utilizes results from an agent-based simulation model to conduct public policy simulation of firms’ networking and cooperation in innovation. The simulation game investigates 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 R&D and spin-off policies to foster entrepreneurship among R&D personnel. These policies are compared with the no-policy alternative evolving from the initial state serving as a benchmark to verify the gains (or loses) in the number of firms cooperating and networking. Firms’ behavior is defined according to empirical findings from analysis of determinants of firms’ participation in cooperation in innovation with other organizations using the Korean Innovation Survey. The analysis based on manufacturing sector data shows that firms’ decision to cooperate with partners is primarily affected positively by firm’s size and the share of employees involved in R&D activities. Then, each cooperative partnership is affected by a different set of determinants. The agent-based models are found to have a great potential to be used in decision support systems for policy makers. The findings indicate possible appropriate policy strategies to be applied depending on the target industries. We have applied few examples and showed how the results may be interpreted. Guidelines are provided on how to generalize the model to include a number of extensions that can serve as an optimal direction for future research in this area.

Suggested Citation

  • Heshmati, Almas & Lenz-Cesar, Flávio, 2014. "Policy Simulation of Firms Cooperation in Innovation," Working Paper Series in Economics and Institutions of Innovation 357, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    • Handle: RePEc:hhs:cesisp:0357
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    More about this item

    Keywords

    agent-based simulation; collaborative R&D; innovation networks; simulation game; policy strategy;
    All these keywords.

    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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