Evolutionary Model of an Innovative and Differentiated Industry

In this paper, we propose an agent based model that describes the spatial and temporal evolution of an industry composed of a set of heterogeneous firms distributed in different regions. The model formalizes a particular hypothesis about spatial agglomeration and industrial concentration phenomena in which innovation occupies the central place of economic and geographical growth explanation. Each company owns one or more manufacturing divisions that produce an exclusive variety of product. Economic selection is modeled as a monopolistic competition market where competitive pressure depends on consumers’ preference for variety. Moreover, firms may enjoy more competitive advantages innovating in processes, product characteristics and new commodities. The purpose of the model is integrating theories which come from research areas traditionally separated into a single formal proposal.