Massimo Ricottilli

The Emergence of Paradigm Setters through Firms' Interaction and Network Formation

Technological innovation requires the gathering of information through a process of searching and learning. We distinguish two different but definitely complementary and overlapping ways through which searching and learning occur. The first exploits the spillover potential that lies in a firm’s network and thanks to which gathering innovationuseful information is actually possible. The second is the autonomous capacity that a firm possesses in order to carry out in-house innovative search. We build a model where rationally bounded firms try to increase their innovative capability through endogenous networking. The paper characterizes the emergence of technological paradigm setters in terms of network properties as they result from searching routines, furthermore the corresponding average efficiency of the system in terms of innovative capability is assessed.

Firms Interaction and Technological Paradigms

This paper deals with the aggregate effects of small, exogenous but idiosyncratic technological shocks on locally interacting firms. Its main purpose is to model a situation in which technological paradigms emerge through endogenous propagation and diffusion of information leading to an aggregate pattern. We develop a theoretical framework in which large technological correlations emerge due to localised interaction of single firms. The paper states some simple results on spill-over dynamics determined by firms trying to improve their current technology and thus generating new information through investment in R&D and through localised technological search. The first part shows that different growth regimes can arise from the general framework of interaction that we propose. The second part shows that an interesting regime characterised both by long run innovation growth and endogenous short run fluctuations emerges spontaneously.

A development strategy with foreign borrowing: A neo- Austrian approach

Abstract Borrowing is crucial to support economic development. This paper contrasts a development process in isolation with one in which capital goods are imported and borrowing takes place. The method adopted is the neo-Austrian approach in which industrialization is viewed as a sequential activity. Indebtedness rises with activity levels and can only be checked by lengthening the production sequence of capital construction, a strategy which implies a complex traverse. Falling activity levels and Hayek effects can occur but outstanding debt will eventually fall on account of rising productivity. This paper shows that disequilibria are structural and cannot be dealt with on purely financial grounds.

Innovation, Specialization and Growth in a Model of Structural Change

The aim of this paper is to investigate the nexus between demand patterns and innovation as it stems from research efforts and the extent of specialization. In the proposed model an innovation race conducted by entrants investing in research and development against established incumbents raises productivity at the industry level and leads to a shift in the aggregate demand pattern and consequently to a redistribution of the profit fund among industries and a restructuring of the production process in each industry. The paper argues that the degree of development as reflected in a demand share distribution is characterized by a corresponding distribution of specialized sectors that becomes more even across industries as the development process proceeds and investigates the consequences in terms of economic growth.

Innovation Diffusion, Technological Convergence and Economic Growth

The paper investigates the mechanics through which novel technological principles are developed and diffused throughout an economy consisting of a technologically heterogeneous ensemble of firms. In the model entrepreneurs invest in the discovery and in the diffusion of a technological principle and their profit flow depends on how many firms adopt the innovation and on how long it takes other entrepreneurs to improve it. We show that technological convergence emerges from the competition among entrepreneurs for the profit flow and characterize the economys growth rate.

Complex Evolution and Learning

Searching and learning are key processes in determining the complex evolution of technological capabilities but take place according to idiosyncratic rules that constrain the way they unfold. In this respect, constraints are often understood as barriers hampering efficient functioning. They are, indeed, seen as orienting activity in specified directions generating performance patterns the upshot of which is likely to be suboptimal. This view may be thought as applying to the domain of social undertakings as well as to activities of a biological nature. Constraints are thus perceived as fetters to efficiency, bounding the required freedom often deemed as crucial to achieve, if not optimal, at least improving solutions. In a recent paper (Ricottilli 2008), it has been argued that constraints set to restrain full freedom of choice, but the argument may well apply to across-the-board functioning of biological entities, act as focusing devises quite often resulting in better performance. The problem at hand takes full contours when dealing with the issue of searching and learning, that is when problem-solving is set in an evolutionary, hence dynamic, context. More particularly, this issue is of utmost relevance when this process is meant to lead to innovation, be it technological or organizational or, in fact, both. It is a well established fact that a firms strategy to survive and thrive in a market environment does require innovative activity and investment. Although markets rarely function according to the classical competitive paradigm, they become contestable precisely thanks to the likelihood of product and process innovation. It is therefore important that a model of searching and learning take fully into account the role that constraints are likely to play in these processes.

Firms’ network formation through thetransmission of heterogeneous knowledge

This paper studies the evolution of a network of leading firms that are engaged in an active search to improve their technological capability through interaction with knowledge-heterogeneous firms. Through the simulation of a linear model of technological spillovers we show the emergence of paradigm setters and the impact of search routines on the system’s average performance.