From innovation to diversification: a simple competitive model

TL;DR

This paper introduces a simple dynamic model where countries expand their exports by innovating new products or copying existing ones, leading to the co-evolution of the product network and country-product matrix.

Contribution

It presents a novel, minimalistic model linking innovation and diversification in export networks through competitive dynamics.

Findings

The model captures the evolution of export bipartite matrices.

It explains the formation of hierarchical product networks.

The approach links innovation processes with network topology evolution.

Abstract

Few attempts have been proposed in order to describe the statistical features and historical evolution of the export bipartite matrix countries/products. An important standpoint is the introduction of a products network, namely a hierarchical forest of products that models the formation and the evolution of commodities. In the present article, we propose a simple dynamical model where countries compete with each other to acquire the ability to produce and export new products. Countries will have two possibilities to expand their export: innovating, i.e. introducing new goods, namely new nodes in the product networks, or copying the productive process of others, i.e. occupying a node already present in the same network. In this way, the topology of the products network and the country-product matrix evolve simultaneously, driven by the countries push toward innovation.