Innovation and informal knowledge exchanges between firms

TL;DR

This paper introduces an agent-based model to explore how geographical proximity and informal knowledge exchanges influence innovation within firm clusters, highlighting the importance of spatial interactions and trade-offs between innovation and diversity.

Contribution

It presents a novel stylised agent-based model to systematically analyze the impact of spatial proximity and informal exchanges on innovation in firm clusters.

Findings

Interaction distance significantly affects innovation outcomes.

Intense spatial interactions lead to qualitative shifts in innovation patterns.

Trade-offs exist between fostering innovation and maintaining product diversity.

Abstract

Firm clusters are seen as having a positive effect on innovations, what can be interpreted as economies of scale or knowledge spillovers. The processes underlying the success of these clusters remain difficult to isolate. We propose in this paper a stylised agent-based model to test the role of geographical proximity and informal knowledge exchanges between firms on the emergence of innovations. The model is run on synthetic firm clusters. Sensitivity analysis and systematic model exploration unveil a strong impact of interaction distance on innovations, with a qualitative shift when spatial interactions are more intense. Model bi-objective optimisation shows a compromise between innovation and product diversity, suggesting trade-offs for clusters in practice. This model provides thus a first basis to systematically explore the interplay between firm cluster geography and innovation, from an evolutionary perspective.