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Innovation and Diversity in a Dynamic Knowledge Network


  • Tamás Sebestyén

    () (Department of Economics and Regional Studies, University of Pécs)


In this paper we examine the evolution of network formation. We present a model in which companies in an industry can innovate alone or in alliance with others. Alliance formation is based on the cognitive distance of companies. If two companies form an alliance, their probability of success in innovation depends on their proximity in knowledge space, that is, their cognitive distance. Knowledge, on the other hand, is modelled in two dimensions: breadth and depth. The main results of our analysis are that in the present setting heterogeneity decreases among companies whilst innovation can increase and decrease also, depending on the initial parameters of the industry's knowledge endowment. The model also reveales the importance of external shocks in maintaining heterogeneity and concludes with a possible typology of cluster evolution among the dimensions of heterogeneity and innovativeness.

Suggested Citation

  • Tamás Sebestyén, 2010. "Innovation and Diversity in a Dynamic Knowledge Network," Working Papers 2010/1, University of Pécs, Department of Economics and Regional Studies, revised Mar 2010.
  • Handle: RePEc:pec:wpaper:2010/1

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    File Function: Revised version, 2010
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    References listed on IDEAS

    1. Max-Peter Menzel & Dirk Fornahl, 2007. "Cluster Life Cycles - Dimensions and Rationales of Cluster Development," Jena Economic Research Papers 2007-076, Friedrich-Schiller-University Jena.
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    More about this item


    knowledge network; innovation; knowledge heterogeneity; alliance formation; cluster evolution;

    JEL classification:

    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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