IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Optimal Search on a Technology Landscape

  • Stuart Kauffman
  • Jose Lobo
  • William G. Macready
Registered author(s):

    Technological change at the firm level has commonly been modeled as random sampling from a fixed distribution o f possibilities. Such models, however, typically ignore empirically important aspects of the firm's search process, notably the observation that the present state of the firm guides future innovation. In this paper we explicitly treat this apsect of the firm's search for technological improvements by introducing a "technology landscape" into an otherwise standard dynamic programming setting where the optimal strategy is to assign a reservation price to each possible technology. Search is modeled as movement, constrained by the cost of innovation, over the technology landscape. Simulations are presented on a stylized technology landscape while analytic results are derived using landscapes that are similar to Markov random fields. We find that early in the search for technological improvements, if the inital position is poor or average, it is optimal to search far away on the technology landscape; but as the firm succeeds in finding technological improvements it is optimal to confine search to a local region of the landscape. We obtain the result that there are diminishing returns to search without having to make the assumption that the firm's repeated draws from the search space are independent and identically distributed.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.santafe.edu/sfi/publications/Working-Papers/98-10-091E.ps
    Our checks indicate that this address may not be valid because: 404 NOT FOUND (http://www.santafe.edu/sfi/publications/Working-Papers/98-10-091E.ps [301 MOVED PERMANENTLY]--> http://www.santafe.edu/sfi/publications/Working-Papers/98-10-091E.ps/). If this is indeed the case, please notify (Thomas Krichel)


    Download Restriction: no

    File URL: http://www.santafe.edu/sfi/publications/Working-Papers/98-10-091E.ps.gz
    Our checks indicate that this address may not be valid because: 404 NOT FOUND (http://www.santafe.edu/sfi/publications/Working-Papers/98-10-091E.ps.gz [301 MOVED PERMANENTLY]--> http://www.santafe.edu/sfi/publications/Working-Papers/98-10-091E.ps.gz/). If this is indeed the case, please notify (Thomas Krichel)


    Download Restriction: no

    Paper provided by Santa Fe Institute in its series Research in Economics with number 98-10-091e.

    as
    in new window

    Length:
    Date of creation: Oct 1998
    Date of revision:
    Handle: RePEc:wop:safire:98-10-091e
    Contact details of provider: Postal: 1399 Hyde Park Road, Santa Fe, New Mexico 87501
    Web page: http://www.santafe.edu/sfi/publications/working-papers.html

    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Terry Jones, 1994. "A Model of Landscapes," Working Papers 94-02-002, Santa Fe Institute.
    2. Baily, Martin Neil & Bartelsman, Eric J & Haltiwanger, John, 1996. " Downsizing and Productivity Growth: Myth or Reality?," Small Business Economics, Springer, vol. 8(4), pages 259-78, August.
    3. M. L. Weitzman, 1978. "Optimal Search for the Best Alternative," Working papers 214, Massachusetts Institute of Technology (MIT), Department of Economics.
    4. James D Adams & Leo Sveikauskas, 1993. "Academic Science, Industrial R&D, and the Growth of Inputs," Working Papers 93-1, Center for Economic Studies, U.S. Census Bureau.
    5. Jovanovic, Boyan & Rob, Rafael, 1987. "Long Waves and Short Waves: Growth Through Intensive and Extensive Search," Working Papers 87-35, C.V. Starr Center for Applied Economics, New York University.
    6. Marengo, L, 1992. "Coordination and Organizational Learning in the Firm," Journal of Evolutionary Economics, Springer, vol. 2(4), pages 313-26, December.
    7. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
    8. Dunne, T. & Roberts, M.J. & Samuelson, L., 1988. "Pattenrs Of Firm Entry And Exit In U.S. Manufacturing Industries," Papers 1-88-2, Pennsylvania State - Department of Economics.
    9. Steve J. Davis & John Haltiwanger, 1991. "Gross Job Creation, Gross Job Destruction and Employment Reallocation," NBER Working Papers 3728, National Bureau of Economic Research, Inc.
    10. Kennedy, Peter W., 1994. "Information processing and organization design," Journal of Economic Behavior & Organization, Elsevier, vol. 25(1), pages 37-51, September.
    11. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
    12. Bikhchandani, Sushil & Sharma, Sunil, 1996. "Optimal search with learning," Journal of Economic Dynamics and Control, Elsevier, vol. 20(1-3), pages 333-359.
    13. Kohn, Meir G. & Shavell, Steven, 1974. "The theory of search," Journal of Economic Theory, Elsevier, vol. 9(2), pages 93-123, October.
    14. Levinthal, Daniel & March, James G., 1981. "A model of adaptive organizational search," Journal of Economic Behavior & Organization, Elsevier, vol. 2(4), pages 307-333, December.
    15. Phil Auerswald & Jose Lobo & Karl Shell, . "A Microeconomic Theory of Learning-by-Doing: An Application of Nascent Technology Approach," Computing in Economics and Finance 1997 128, Society for Computational Economics.
    16. Timothy Dunne & John Haltiwanger & Kenneth R. Troske, 1996. "Technology and Jobs: Secular Changes and Cyclical Dynamics," NBER Working Papers 5656, National Bureau of Economic Research, Inc.
    17. Ericson, Richard & Pakes, Ariel, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Wiley Blackwell, vol. 62(1), pages 53-82, January.
    18. Sahal, Devendra, 1985. "Technological guideposts and innovation avenues," Research Policy, Elsevier, vol. 14(2), pages 61-82, April.
    19. Evenson, Robert E & Kislev, Yoav, 1976. "A Stochastic Model of Applied Research," Journal of Political Economy, University of Chicago Press, vol. 84(2), pages 265-81, April.
    20. Audretsch, David B, 1991. "New-Firm Survival and the Technological Regime," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 441-50, August.
    21. Dunne, Timothy & Roberts, Mark J & Samuelson, Larry, 1989. "The Growth and Failure of U.S. Manufacturing Plants," The Quarterly Journal of Economics, MIT Press, vol. 104(4), pages 671-98, November.
    22. Prescott, Edward C & Visscher, Michael, 1980. "Organization Capital," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 446-61, June.
    23. Herriott, Scott R & Levinthal, Daniel & March, James G, 1985. "Learning from Experience in Organizations," American Economic Review, American Economic Association, vol. 75(2), pages 298-302, May.
    24. John F. Muth, 1986. "Search Theory and the Manufacturing Progress Function," Management Science, INFORMS, vol. 32(8), pages 948-962, August.
    25. Peter F. Stadler & Robert Happel, 1995. "Random Field Models for Fitness Landscapes," Working Papers 95-07-069, Santa Fe Institute.
    26. Douglas W Dwyer, 1995. "Technology Locks, Creative Destruction And Non-Convergence In Productivity Levels," Working Papers 95-6, Center for Economic Studies, U.S. Census Bureau.
    27. David Audretsch, 1994. "Business Survival and the Decision to Exit," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 1(1), pages 125-137.
    28. Denis M. S. Lee & Thomas J. Allen, 1982. "Integrating New Technical Staff: Implications for Acquiring New Technology," Management Science, INFORMS, vol. 28(12), pages 1405-1420, December.
    29. Cohen, Wesley M & Levinthal, Daniel A, 1989. "Innovation and Learning: The Two Faces of R&D," Economic Journal, Royal Economic Society, vol. 99(397), pages 569-96, September.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:wop:safire:98-10-091e. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Krichel)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.