The aims of this paper are twofold. The first is to analyse the
interaction between research and development (R&D) activities of firms
and heterogeneous consumer preferences in structuring the evolution of
an industry. The second is to explore the heterogeneity in firms'
innovation strategies. Is heterogeneity sustainable in the long-term and
what happens to the market shares of firms having different innovation
strategies when a structural market characteristic (market size) or a
behavioural rule (R&D intensity) is changed? To answer these research
questions, an evolutionary, multi-agent based, sector-level innovation
model is designed. The model addresses supply and demand sides of the
market simultaneously with the co-evolution of heterogeneous consumer
preferences, heterogeneous firm knowledge bases, and technology levels
at the micro level.
Keywords: Heterogeneity; innovation strategies; evolutionary economics; agent-based modelling
JEL Classification: B52, L11, O33