Firm Size, Innovation, and Market Share Instability: the Role of Negative Feedback and Idiosyncratic Events

The paper uses evolutionary economics and computer simulation techniques to explore structural and random determinants of industry market structure. The former is studied in the context of different Schumpetarian debates on the relationship between firm size and innovation (dynamic returns to scale), and the latter is studied in the context of studies that emphasize the role of idiosyncratic events, path-dependency and initial conditions in industry dynamics. The object is to better understand the determinants of empirical regularities in market share patterns by varying the type and strength of dynamic returns to scale and the size of shocks to costs.