Absorbing Technological Spillovers: Simulations in an Evolutionary Framework

This paper offers a simulation analysis of firm strategies which differ by the degree of absorbing technical know-how generated elsewhere. It investigates the success of those firm strategies in a hetergeneous oligopoly setting in which firms compete by introducing new products and processes. Simulation results show that building up absorptive capacities tends to be a superior strategy in technologically heterogeneous environments. Reducing spillover effects leads to a slowdown of technological progress because cross-fertilization effects are of minor relevance. Where market competition is reduced the absorptive strategy tends to be only technologically superior.