The dynamics of firms in a micro-to-macro model: The role of training, learning and innovation

Ballot G., Taymaz E.

JOURNAL OF EVOLUTIONARY ECONOMICS, vol.7, no.4, pp.435-457, 1997 (SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 7 Issue: 4
  • Publication Date: 1997
  • Doi Number: 10.1007/s001910050052
  • Journal Name: JOURNAL OF EVOLUTIONARY ECONOMICS
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus
  • Page Numbers: pp.435-457
  • Keywords: evolutionary theory, endogeneous growth, human capital, innovation, diffusion, learning, artificial intelligence, microsimulation
  • Middle East Technical University Affiliated: Yes

Abstract

We analyze the co-evolution of the performances of firms and of the economy in an evolutionary micro-to-macro model of the Swedish economy. The model emphasizes the interactions between human capital (or competences) and technological change at the firm level and their effects;on aggregate growth, taking into account the micro-macro feedbacks. The model features learning-by-doing, incremental and radical innovations, user-producer learning at the firm level, and a change in the techno-economic paradigm. We find that there is an optimal sequence for the firm to allocate their resources: (1) build a general human capital stock before the change in the techno-economic paradigm, (2) spend on R&D, and (3) invest in specific human capital. Innovators fare better than imitators on average, not only because they innovate, but also because they build a competence base, which supports the learning from other firms.