An Agent-Based Model of Firm Size Distribution and Collaborative Innovation

ICT-based Collaborative innovation has a significant impact on the economy by facilitating technological convergence and promoting innovation in other industries. However, research on innovation suggests that polarization in firm size distribution, which has grown since the early 2000s, can interfere with collaborative innovation among firms. In this paper, I modelled firms’ decision-making processes that led to collaborative innovation as a spatial N-person iterated Prisoner’s dilemma (NIPD) game using collaborative innovation data from Korean ICT firms. Using an agent-based model, I experimented with the effects of firm size heterogeneity on collaborative innovation. The simulation experiment results reveal that collaborative innovation in the industry increases as the size heterogeneity decreases. Findings suggest that policies promoting collaborative innovation should focus on mitigating structural inequalities in the industry.