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Cristiano Antonelli and Gianluigi Ferraris

This chapter elaborates the notion of innovation as the outcome of creative responses made possible by the quality of knowledge externalities available in the system. As such the introduction of innovations can be analysed as an emerging property of complex system dynamics. The chapter presents an agent-based simulation model (ABM) of an economy where systemic knowledge interactions among heterogeneous agents are crucial for the recombinant generation of new technological knowledge and the introduction of innovations. In this approach the system’s organization plays a crucial role in assessing the chances of individual firms actually introducing innovations because it qualifies access to external knowledge, an indispensable input, together with internal learning and research, in the generation of new knowledge. The introduction of innovations is analysed as the result of systemic knowledge interactions among myopic agents credited with an extended procedural rationality that includes forms of creative reaction. The agents’ creative reaction may lead to the introduction of productivity enhancing innovations. This takes place only when the structural, organizational and institutional characteristics of the system are such that agents, reacting to out-of-equilibrium conditions, can actually take advantage of external knowledge available within the innovation system in which they are embedded to generate new technological knowledge. The ABM enables us to explore the effects of alternative organizational features, namely different configurations of intellectual property rights regimes and architectural configurations of regional structures in which knowledge interactions take place, on rates of technological innovation. The results suggest that the dissemination of knowledge favours the emergence of creative reactions, and hence faster introduction of technological innovations.

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Cristiano Antonelli and Gianluigi Ferraris

Analysis of the Marshallian and Schumpeterian microfoundations of endogenous innovation enables us to draw a line between the new emerging evolutionary complexity from biological evolutionary analysis and to overcome its limits. This chapter integrates the Marshallian process of imitation and selection with the Schumpeterian creative response. In Marshall initial variety is given and exogenous, the dynamics of the process is driven by the selective diffusion of best practice and long-term equilibrium stops the generation of externalities; firms are not expected to try to react to unexpected mismatches between planned and actual product and factor market conditions. In Schumpeter firms are allowed to try to react, and the quality of knowledge externalities supports their creative response and may keep the system in a self-sustained process of growth. The Schumpeterian creative response can be regarded as a special case of the Marshallian dynamics that takes place when externalities – available to all firms, including best-performing ones – enable the introduction of innovations that account for the reproduction of superior performance and variety. The levels of reactivity of agents and of quality of knowledge externalities, provided by the system, account for output and productivity growth. This hypothesis is tested by means of an agent-based simulation model that shows how these microfoundations of endogenous innovation are able to generate aggregate dynamics based upon the interaction between individual decision-making and system properties.

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Cristiano Antonelli, Francesco Crespi and Giuseppe Scellato

This chapter analyses the dynamics of path dependence, exploring the determinants of the persistence of firm productivity, here measured by total factor productivity (TFP). It highlights the crucial role of the interplay between the internal characteristics of companies, including their size and management strategies, and system properties such as access conditions to local pools of knowledge and the dynamics of economic activity in assessing the dynamics. Analysis of transition probability matrices (TPMs) and econometric analysis provide substantial evidence of the relevance of the mix of individual and systemic factors in shaping persistence as a path-dependent process in which events that take place along the process affect its direction and the pace of productivity dynamics.

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Cristiano Antonelli and Claudio Fassio

This chapter investigates the heterogeneity of the sources of external knowledge and identifies their differentiated effects on process and product innovations. Upstream vertical sources of external knowledge from suppliers exert a strong and positive role on the introduction of process innovations, while horizontal and downstream vertical sources stemming from competitors and customers respectively have stronger effects on the introduction of product innovations. The evidence supports the hypothesis that matching of sources of external knowledge and types of innovation is necessary to implement successful innovation strategies.

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Vincent Rious and Nicolò Rossetto

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Leonardo Meeus and Pradyumna Bhagwat

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Vincent Rious and Nicolò Rossetto

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Leonardo Meeus and Samson Yemane Hadush

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Electricity Network Regulation in the EU

The Challenges Ahead‎ for Transmission and Distribution

Edited by Leonardo Meeus and Jean-Michel Glachant

The UK model of incentive regulation of power grids was at one time the most advanced, and elements of it were adopted throughout the EU. This model worked well, particularly in the context of limited investment and innovation, a single and strong regulatory authority, and limited coordination between foreign grid operators. This enlightening book shows that since 2010 the whole context has changed and regulation has had to catch-up and evolve. The EU is entering a wave of investment, and an era of new services and innovation which has created growing tensions between national regulatory authorities in terms of coordinating technical standards and distribution systems. This is being played out against an increasingly disruptive backdrop of digitzation, new market platforms and novel business models.
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Edited by Leonardo Meeus and Jean-Michel Glachant