1 THE SIMULATION OF INNOVATION NETWORKS FOR POLICY Nigel Gilbert 1 , Petra Ahrweiler 2 and Andreas Pyka 3 1 Centre for Research on Simulation in the Social Sciences, University of Surrey, Guildford, UK n.gilbert@soc.surrey.ac.uk 2 Research Center Media and Politics, Institute for Political Science, University of Hamburg, Germany 3 Economics Department, University of Augsburg, Germany ABSTRACT A multi-agent simulation embodying a theory of innovation networks has been built and used to suggest a number of policy-relevant conclusions. The simulation animates a model of innovation (the successful exploitation of new ideas) and this model is briefly described. Agents in the model representing firms, policy actors, research labs, etc. each have a knowledge base that they use to generate ‘artefacts’ that they hope will be innovations. The success of the artefacts is judged by an oracle that evaluates each artefact using a criterion that is not available to the agents. Agents are able to follow strategies to improve their artefacts either on their own (through incremental improvement or by radical changes), or by seeking partners to contribute additional knowledge. It is shown that different parameter sets for the model yield behaviours that are qualitatively similar to those of innovation networks in biotechnology and mobile communications. Experiments with the model yield generalisations that may hold lessons for innovation policy. KEYWORDS Innovation, Research and development policy, Social networks, Social simulation. 1. INNOVATION NETWORKS Innovation – the successful development and marketing of new products, processes and ideas – is increasingly recognised as requiring the convergence of many sources of knowledge and skill. Few innovations can be attributed to a single technological field or even to just one firm (Nelson, 1993). Innovation policy has therefore turned to the encouragement of networks and collaborations between organisations as a means of enhancing the rate of innovation. An innovation network may be defined as a set of actors (people or organisations) that interact with the purpose of generating innovations. Some innovation networks are ‘designed’ by the participants with the explicit goal of creating a structure that will enhance the potential for innovation, but many others are created through cooperation agreements or supplier-client relationships without any conscious realisation that the effect is to form a network. Networks can be large, involving tens of actors, or small, with only a few firms. Innovation networks are often formed from a variety of types of actors. For example, in one area that we have been studying, research on mobile telecommunications, the network consists of mobile telecom equipment manufactures, mobile network operators, the government, and a number of universities. In biotechnology, another one of our case studies (Pyka and Saviotti, 2000), networks are typically composed of one ‘large diversified firm’ (such as Glaxo-Wellcome) and a few dedicated biotechnology firms (DBFs). Figure 1 is a web page from a member of such a network.