Participants:
UParis2, ISI, UW, SSSUP.
Objectives:
Economic activity is not randomly distributed across space; it is most often localized, in cities for instance. We here propose a possible explanation of the localization of economic activities, and especially of new industries in terms of the "AB phenomena".
Description of work:
We start from the existence of local auto-catalytic processes, or even auto-catalytic loops (hypercycles), coupling the growth of capital, knowledge, labour and business. Local "reaction processes" will be described by a set of ordinary differential equations or by local rules in the spirit of agent based modeling. Local quantities are coupled via capital, labour, knowledge and products markets, involving diffusion mechanisms in our formalism. The study of this economic hypercycle model should then lead to different dynamical regimes according different parameter values. We will compare those predictions to empirical observations.
Deliverables:
D3.1 Modeling interactions in “new industries”. Month 12.
D3.2 Processed empirical data from start-up companies. The data acquired from standard sources, such as National Venture Capital Association for the US companies and European Venture Capital Association for Europe, and those collected by the collaboration in Israel, will be processed for comparison with theoretical predictions. Month 24.
D3.3 Models and simulation results. Formal models (algorithms) and simulation results. Month 36.
Milestones and expected result:
Construction of a set of models of variable sophistication. "Phase diagrams" relating dynamical regimes to parameter sets.
Comparison of the predicted dynamical regimes to empirical observations of the development of start-up companies in different industries and places such as California, Europe and Israel.
The main questions are to determine:
What are the conditions suitable for the development of new industries (in terms of the parameters of the model such as diffusion, coupling and reaction constants)?
What can be predicted, with how much confidence?
One of the expected outcomes of our research is to appreciate new opportunities and associated risks in the development of new high tech areas, and to favour the best conditions for their success.