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The Evolutionary Complexity of Endogenous Innovation

The Engines of the Creative Response

Cristiano Antonelli

The notion of endogenous innovation as the outcome of the creative response of firms to out-of-equilibrium conditions is the cornerstone of the new evolutionary complexity. This book elaborates and applies the theoretical framework established in the author’s previous work Endogenous Innovation: The Economics of an Emergent System Property. This volume carefully explores the role of the reactivity of firms to out-of-equilibrium conditions. It also examines the quality of knowledge governance mechanisms in assessing the levels of externalities that define the likelihood of creative responses, as an alternative to adaptive responses.
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Index

Cristiano Antonelli

absorption of external knowledge 323, 1545, 213, 21516
costs of 1112, 16, 87, 2068, 212, 216, 21819, 237
academic networks 17071, 237
adaptive response 1, 45, 17, 23, 215
agent-based simulation model (ABM), endogenous knowledge externalities
analytical representation of simulation model 21620
assumptions 21014
conclusions 234
detailed presentation of innovation process simulation 21416
results 22333
system dynamics of endogenous knowledge externalities 22022
agent-based simulation model (ABM), evolutionary complexity 6072
economic interpretation of results 726
agent-based simulation model (ABM), innovation process at system level 2835, 534, 205
intellectual property rights (IPR) regimes 33, 3742
policy implications 512
regional dissemination of knowledge 4251
results 3551
agents
interdependence of 24
knowledge interactions between 212, 245
and system dynamics 256
agglomeration externalities 58
Antonelli, C. 26, 84
appropriation of knowledge 11, 58, 74, 84, 153, 154, 2056, 207
Arrow, Kenneth 154
Baily, M.N. 179, 180
Bartelsman, E.J. 113, 179, 180
behavioural theory of firms 234
biological evolutionary economics 75
Bottazzi, G. 17980
bounded rationality 23, 29, 210
Bureau Van Dijk
Aida database 186
Amadeus database 91, 133
Business Cycles (Schumpeter) 23, 4, 8
Capitalism, Socialism and Democracy (Schumpeter) 2, 3, 4, 8, 131, 153
Cappelli, R. 112
CDM (constructionist design methodology) model 19, 856, 93
Clausen, T. 182
Cobb–Douglas specification 19, 84, 85
cognitive distance (cost of knowledge model) 137, 138, 139, 14041, 143, 144, 145, 146, 147, 148
cognitive distance index 99102
Community Innovation Survey (CIS) 4 114
complexity 1, 27, 26, 35
see also evolutionary complexity, microfoundations of
Conte, A. 86
cost of knowledge 128
absorption of external knowledge 1112, 16, 87, 2068, 212, 216, 21819, 237
average unit cost 151, 152, 1612, 163, 167, 170
and creative response 6, 12, 15, 1920
evolutionary complexity ABM 623
knowledge as input and output 12933
knowledge cost function 129, 130, 1323, 1489
knowledge governance 208, 209, 212, 221, 222, 224, 2257, 229, 2334, 235
cost of knowledge, and productivity growth 1512
analytical context 1526
conclusions 1723
descriptive evidence 1612
empirical evidence 16170
estimation strategy 1627, 175
model 15661
policy implications 17072
results 16770
cost of knowledge model
conclusions and implications for further research 14850
data 1334
methodology and variables 1349, 140
results 139, 1418
creative destruction 36, 233
creative response 14, 1618, 256, 1534
and behavioural theory 223
dynamics of, graphic exposition 1316
endogenous relationship between out-of-equilibrium conditions and innovation 67
innovative response 45
interdependence of elements comprising 1316, 1920
and knowledge externalities 6, 1112, 1314, 15
levels of knowledge governance 1012
and rationality 5
reactivity and research 710, 19
see also evolutionary complexity, microfoundations of
Crépon, B. 19, 856, 93
cycles, growth 6871
Da Silva, M.A. 85
Darwinian selection process 10, 745, 77
David, P.A. 84
debt, long-term (productivity growth persistence model) 193, 194, 195, 198
Dhrymes, P. 179, 180
downstream knowledge flows 113, 114, 115, 11617, 120, 121, 1224, 1256
Duguet, E. 856
dynamic capabilities approach 1778, 1812, 185
Ebersberger, B. 111
emergent system property, innovation as 2, 212, 205, 208, 234
agent-based simulation model (ABM) 2835
conclusions 524
policy implications 512
simulation results 3551
theoretical framework 228
emergent system property, productivity persistence as 182, 184, 185, 19091, 193, 1967, 199
endogenous dynamics of pecuniary knowledge externalities, see pecuniary knowledge externalities, endogenous dynamics of
entrepreneurship 8, 1718, 59, 60, 72
equilibrium, Marshallian 15, 29, 589, 767
equilibrium economics 1
European Patent Office (EPO) 92
evolutionary complexity 1, 27
evolutionary complexity, microfoundations of 567
agent-based simulation model (ABM) 6076
conclusions 769
economic interpretation of simulation results 726
Marshallian and Schumpeterian approaches 5660, 64, 65, 6779
role of externalities 5760
exogenous innovation
Marshallian approach 579
Schumpeterian approach 734
external knowledge
access to 25, 323, 356, 206, 208, 213, 21819, 2367
architectural characteristics of interactions network 278
complementarity with internal knowledge 11011, 205
as indispensable input 84, 85, 8891, 130
and relocalization 335, 216, 21920
sources of 11214, 115
see also absorption of external knowledge; cost of knowledge; knowledge generation function, external and internal knowledge in
external knowledge, role in introduction of product and process innovations 10910
data 11416, 117
hypotheses 11214, 115
implications and conclusions 1257
methodology 11618
results 11824
theoretical framework and hypotheses 11014
external learning 214, 226
externalities, see imitation externalities; knowledge externalities; pecuniary knowledge externalities; pecuniary knowledge externalities, endogenous dynamics of
firms
behavioural theory of 234
as myopic agents 223
see also size of firms
foreign direct investment (FDI) 52
Furman, J.L. 85
GDP per capita (cost of knowledge and productivity growth model) 165, 166, 168, 170
Gehringer, A. 87
general equilibrium, static 223
generation of knowledge, see knowledge generation; knowledge generation function, external and internal knowledge in
Geroski, P. 180
Giannangeli, S. 179, 180
Gomez-Salvador, R. 179, 180
Griliches, Z. 83
Grimpe, C. 111
growth, and Darwinian selection process 10, 745
Herstad, S.J. 111
horizontal external knowledge 11213, 114, 115, 11718, 12024, 125
Howells, J. 111
human capital
cost of knowledge and productivity growth model 165, 166, 168
mobility 237
and productivity growth 177
imitation externalities 589, 74, 76
agent-based simulation model (ABM), evolutionary complexity 64, 65, 67, 68, 71
innovation persistence 177, 180, 1845
innovative response 45
intangible assets 183
intellectual property rights (IPR) regimes 267, 33, 3742, 47, 51, 1712, 229, 2367
see also patents
Intergovernmental Preparedness for Essential Records (IPER) database 91, 133
internal knowledge
complementarity with external knowledge 11011, 205
see also cost of knowledge; external knowledge, role in introduction of product and process innovations; knowledge generation function, external and internal knowledge in
internal learning 32, 214, 218, 224, 226, 229
internal slack competence 32
Inverse Mill’s Ratio (IMR) 95
Jaffe, A. 84, 87, 101
Johansson, B. 88
Kaiser, U. 111
knowledge 245
characteristics of 84, 129, 154
as input and output 12933, 154, 20510
knowledge absorption, see absorption of external knowledge
knowledge appropriation 11, 58, 74, 84, 153, 154, 2056, 207
knowledge centres 34, 52
knowledge coherence (cost of knowledge model) 136, 138, 139, 14041, 144, 145, 146, 147, 148
knowledge commons 2034, 2078, 209
endogenous dynamics of pecuniary knowledge externalities model 21112, 213, 216, 21722, 22333, 2345
knowledge complementarity 8990, 96, 11011, 129, 130, 205
knowledge connectivity 1556, 2034, 206, 2334
knowledge costs, see cost of knowledge; cost of knowledge, and productivity growth; cost of knowledge model
knowledge cumulability 129, 130, 154, 181, 184
knowledge density 2078, 21819
knowledge dissemination
agent-based simulation model (ABM), innovation process at system level 4251, 54
policies 512, 17071, 2367
knowledge externalities 245, 5960, 130
agent-based simulation model (ABM), evolutionary complexity 62, 63, 64, 68, 734, 756
and creative response 6, 1112, 1314, 15
localized character of 91
nature of 154
and productivity-enhancing innovations 1526
see also pecuniary knowledge externalities; pecuniary knowledge externalities, endogenous dynamics of
knowledge generation 24, 110
architectural trade-off (network of interactions) 278
basic inputs 154
and creative response 1314
and intellectual property rights (IPR) 27, 37
Marshallian approach 132
and nature of knowledge inputs 13031
over time 1812
path dependency of 130
policy 14950
Schumpeterian approach 778, 1312, 1412, 149
as specific economic activity 129
see also cost of knowledge, and productivity growth; external knowledge, role in introduction of product and process innovations; pecuniary knowledge externalities, endogenous dynamics of
knowledge generation function, external and internal knowledge in 19, 823
cognitive distance index 99102
conclusions 1068
datasets 913
emergence of knowledge generation function 838
hypothesis (external knowledge as essential input) 8891
knowledge generation function 967, 1568
methodology and variables 93102
R&D equations 945
recombinant approach 8891
results 1026
variables’ measurement methods 979, 100
knowledge governance
agent-based simulation model (ABM), evolutionary complexity 658, 712, 74
costs 208, 209, 212, 221, 222, 224, 2257, 229, 2334, 235
and creative response 1012, 14, 1516, 17, 18
policies 236
knowledge intensity (productivity growth persistence model) 190
knowledge-intensive businesses (KIBs) 52, 17071
knowledge interactions 1011, 212, 23, 245, 155, 17071, 2034, 206, 210
knowledge producers (KPs) (agent-based simulation model, innovation process at system level) 4251
knowledge sharing 209
knowledge spillovers 1112, 834, 88, 206, 21920
knowledge stickiness 206
knowledge stock, see stock of knowledge
knowledge variety (cost of knowledge model) 136, 1389, 14041, 1423, 144, 145, 146, 147, 148
large firms, advantages of 1312
Lazonick, W. 45
learning 32, 214, 218, 224, 226, 229
Lévy flight traits 213, 216, 2234
Lööf, H. 88
Love, J.H. 878
Mairesse, J. 856
management
and entrepreneurship 1718
and productivity growth persistence 1813
reactivity 8
March, Jamie 23
market equilibrium, Marshallian approach 15, 29, 589, 767
markets 2930, 35
Marshallian approach 5660, 745
cost of knowledge 142
externalities 58, 59, 76, 132
interactions among heterogeneous agents 723
knowledge generation 132
market equilibrium 15, 29, 589, 767
output growth 6971, 73
reactivity 72
see also imitation externalities
microeconomic foundations of innovation, see evolutionary complexity, microfoundations of
Mokyr, Joel 131
multinational companies 52
Nelson, R.R. 84, 154
Nesta, L. 86
OECD REGPAT database 92, 133
open innovation strategies 11112
out-of-equilibrium conditions 12, 1618
and cost of knowledge 1556
dynamics of creative response, graphic exposition 1316
endogenous knowledge externalities 2346
and innovation 27, 31, 778, 209, 21213, 215, 234
levels of knowledge governance 1012
reactivity and research 19
see also pecuniary knowledge externalities, endogenous dynamics of
outsourcing 111, 183
Parisi, M.L. 86
passive reactions (Schumpeter) 153
patents 267, 33, 3742, 47, 84, 86
and academic research 87
cost of knowledge and productivity growth model 164, 165, 166, 168, 175
cost of knowledge model 1334, 1356, 1379, 14042, 1435, 146, 147, 148, 149
datasets 92, 1334
distribution across technological classes 87
knowledge generation function model 92, 93, 968, 99, 100, 101, 1045
limits as source of information 133
policies 2367
path dependence 31
knowledge generation 130
pecuniary knowledge externalities 20910, 212, 221, 236
productivity growth persistence 182, 195, 199200
Patrucco, P. 85
pecuniary knowledge externalities 63, 756, 779, 87, 152, 1534, 1556
cost of knowledge and productivity growth model 15661, 1623, 164, 173
definition of 207
pecuniary knowledge externalities, endogenous dynamics of 2035
agent-based simulation model (ABM) 21033
conclusions and policy implications 2337
knowledge externalities as input and output of system dynamics 20510
simulation results 22333
system dynamics 22022
procedural rationality 5, 29
process and product innovations, see external knowledge, role in introduction of product and process innovations
production function, technology 20, 82, 83, 856, 15861
productivity
agent-based simulation model (ABM), endogenous knowledge externalities 22022, 224, 22631, 232, 235
agent-based simulation model (ABM), evolutionary complexity 615, 668, 712, 73
agent-based simulation model (ABM), innovation process at system level 3035, 36, 3742, 43, 44, 46, 4751
and patents 3742
and R&D 856
reactivity and research 10
productivity growth, and cost of knowledge, see cost of knowledge, and productivity growth
productivity growth persistence 17680
productivity growth persistence model
conclusions 197, 199200
dataset 1868
empirical analysis 18697, 202
hypotheses and research design 1815
modelling structure 1913
results 1947, 198
transition probability matrices (TPM) on TFP growth rates 18891, 202
public policy 18, 52
public research infrastructures 18, 17071, 237
R&D 838, 11011
choice of sites for 150
cost of knowledge and productivity growth model 164, 165
cost of knowledge model 133, 135, 138, 139, 14041, 142, 1448, 149
knowledge generation function model 19, 90, 91, 925, 97, 98, 99, 100, 1025
as long-term investment 183
and out-of-equilibrium conditions 3, 6, 710, 1415, 19
outsourcing 111, 183
productivity growth persistence model 19091, 1934, 1967, 198
public research infrastructures 18, 17071, 237
role of external knowledge model 115, 11627
rationality 5, 23, 29, 210
reactive agents 212
reactivity 45, 710, 13, 14, 1617
agent-based simulation model (ABM), evolutionary complexity 60, 64, 656, 67, 68, 712, 734
recombinant knowledge approach 8891, 1367, 205
cognitive distance index 99102
relocalization 335, 216, 21920
Roper, S. 878
royalties 1712
satisficing approach to innovation 21415
Saviotti, P.P. 86
Schumpeterian approach 756, 78
entrepreneurship 8, 59, 60, 72
exogenous innovation 734, 77
externalities 6, 5960, 76, 77, 1534, 208
interactions among heterogeneous agents 723
knowledge generation 778, 1312, 1412, 149
and Marshall 57, 59, 767
output growth 6871
performance and innovation 24
rationality 5
reactivity 45, 72
summary of different dynamic levels 74
see also creative response
selection process, Darwinian 10, 745, 77
sequential phases of innovation 21516
Simon, Herbert 5, 23
size of firms
and cost of knowledge 1312, 1378, 139, 142, 1456, 148, 149
and exploitation of knowledge 1467
and productivity growth 176, 178, 1834, 18990, 193, 194, 197, 198, 199
slack competence 32, 215
SMEs, and productivity growth 176, 184, 189, 199
spillovers, knowledge 1112, 834, 88, 206, 21920
stock of knowledge 86, 89, 90, 12931
access to 156
knowledge generation function model 19, 979, 100, 1056, 1078
and knowledge governance 11
and size of firms 1312
see also cost of knowledge; cost of knowledge, and productivity growth
Strumsky, D. 87
system, organization and structure 24, 25
system dynamics 256
knowledge externalities 20510, 21314, 22022
system property, emergent, see emergent system property, innovation as; emergent system property, productivity persistence as
technological proximity 1012
technology policy 14950
technology production function 20, 82, 83, 856, 15861
Theory of Economic Development (Schumpeter) 57, 59, 77
Theyel, N. 11112
Thomson Reuters Datastream 91, 133
total factor productivity (TFP) growth, see cost of knowledge, and productivity growth; productivity growth persistence; productivity growth persistence model
trade openness (cost of knowledge and productivity growth model) 165, 166, 168
upstream knowledge flows 113, 114, 115, 11617, 120, 121, 1224, 1256
value chains, knowledge flows within 11314, 115, 11617, 120, 121, 1224, 1257
variety 910, 15, 58, 745, 77
variety, knowledge (cost of knowledge model) 136, 1389, 14041, 1423, 144, 145, 146, 147, 148
vertical external knowledge 11314, 115, 11617, 120, 121, 1224, 1257
vertical integration (productivity growth persistence model) 193, 194, 195, 198
view parameter 33
Vivarelli, M. 86
Weitzman, M.L. 84, 88
Wooldridge, J. 95, 103, 104, 105
Youn, H. 87
zero-inflated regression models 97