Modeling Knowledge Development in an Economic Context Rögnvaldur J. Sæmundsson ABMS August 20

Overview Who am I? Rationale – Why do this? Research questions Basic concepts/modules Points to remember

Rögnvaldur J. Sæmundsson Associate prof. School of Business. Electrical Engineering from UI. Sleep Research Unit at Landspitalinn. MS in Engineering from UI. Director of Software Dev at Flaga. PhD in Technology Man. from CTH. Research on New Technology-Based Firms (NTBFs). Emphasis on development of technical knowledge.

Why simulate knowledge development? Knowledge is central to innovation. Innovation and economic development. Knowledge development is complex......and is difficult to handle empirically. Simulation an exiting tool for research......especially agent-based.

What are we trying to accomplish? Teach agent-based modeling techniques Train you to deal with multilevel complexity Intellectual challenge=fun Building blocks for research Simple ‘proof-of-principle’ models –answer basic questions/confirm stylized facts Not ‘history friendly’ models –not to predict the future or explain the past

Research questions How is knowledge development in firms related to the coordination mechanisms used for organizing? How is knowledge development in firms related to the structure of their industry? How is knowledge development in firms related to access to resources in their industry?

Knowledge development Knowledge as skills = what you can do Development = Changes in endowments Speed and structure Important dimensions: –Fields –Level Important dynamics –Accumulation –Specialization and integration (inter and intra firm) Constraints –Usefulness and cost

Basic modules Individuals Firm Individuals Firm Industry Product market Factor market External knowledge generation

Individuals Employees Carriers of knowledge Have preferences Take on different roles in the firm –Management –Operations –Research and Development (R&D)

Firms Governance structure – legal entity Bus. opportunities - innovation/imitation Bundle of resources –human, physical, financial Operations and exchange Administrative unit –direction –organization (coordination mechanisms)

Industry Group of firms that compete in the market Competing products/services –Function –Value Industry structure –Concentration (number, size) –Maturity - Innovation life cycle Creative destruction

Product market Market for outputs (products and services) Products and services –Utility/function –Price Customers are agents (firms, consumers)

Factor market Market for inputs (resources) Resources –Human (carriers of knowledge) –Physical (capacity) –Financial (means to obtain the other) Will focus on human and financial Resource owners are agents (firms, indiv.)

External knowledge generation Knowledge developed outside the industry –Universities –Research institutes –Other industries Diffusion to the industry based on: –Knowledge seeking activities –Prior knowledge (absorptive capacity)

Remember Focus on knowledge development within an economic context. Only the starting point is provided – the rest is up to you. Aim for simplicity given the objective of the modeling (research questions). Compare to ‘stylized facts’ Question – embrace the challenge.