Current Research Interests

Complex models of innovation on rugged technology landscapes Endogenous evolutionary models of economic growth, and comparison with neoclassical rational expectations models with learning Applied econometrics of complex systems:
Long memory Skewed, fat-tailed distributions (e.g. Pareto vs. Lognormal) Spatio-temporal clustering Graph-theoretic properties of technological trajectories

Risk management in a Paretian universe

Percolating Complexity: Generating the Complex Patterns of the Innovation Process from a Simple Probabilistic Lattice, with some Empirical Illustrations
Gerald Silverberg MERIT, Maastricht University based on joint work with Bart Verspagen ECIS, Eindhoven University of Technology

Lyon Exystence Thematic Institute, June 2003

What is Complexity, and What is a Complex Dynamics Model?

Negative definitions: Dick Day (1994): Something not generated by a point attractor or a limit cycle, i.e., highly unpredictable with classical deterministic methods. If we add noise and think about it observationally: Something that is not Gaussian and short-memory (i.e., stable ARMA process) or does not consist solely of a finite number of sharp spectral peaks above background noise. Positive, heuristic definitions: A complex spatio-temporal structure with significant clustering or longrange correlations

Examples: 1/f noise, power laws, fractals, long memory, intermittancy

Possible modeling approaches: exploit extended critical systems such as percolation, self-organized criticality (sandpiles, etc.)

Stylized Facts About Technological Change

1. Technical change is cumulative: new technologies build on each other. 2. Technical change follows relatively ordered pathways, as can be measured ex post in technology characteristics space (see the work of Sahal, Saviotti, Foray and Gruebler, etc.). This has led to the positing of natural trajectories (Nelson), technological paradigms (Dosi), and technological guideposts (Sahal). 3. The arrival of innovations appears to be stochastic, but more highly clustered than Poisson (overdispersion). 4. The size of an innovation is drawn from a highly skewed distribution (as evidenced e.g. by citation and co-citation frequencies compiled by Tratjenberg and van Raan). 5. Technological trajectories bifurcate and also merge.

6. There appears to be a certain arbitrariness in the path actually chosen, which could be the result of small events (path dependence or neutral theory?) and cultural and institutional biases (social construction of technology?).
7. Incremental improvements tend to follow upon radical innovations according to rather regular laws (learning curves).

Raw data and four fitted regression models for supersample data. Pure Poisson models are rejected against negative binomial (overdispersed) models

(a) Innovation supersample

9 8 7 6 5 4 3 2 1 0

1760

1780

1800

1820

raw data

1840

1860

fit nb

1880

1900

fit Poisson

1920

1940

1960

1980

Frequency Distribution of Patent Citations

250
Number of Patents

Patent Citations by Rank

100

200 150 100 50 0 0 20 40 Number of Citations 60 80

1 0 0.5 1 1.5 Log Rank 2 2.5 3
Citations

10

Patent Citations +1 by Rank

Frequency distributions of CT scanner patent citations. Linear scale above, double log plot by rank above right, with self-citation left. Data source: Tratjenberg (1990).
100

Citations + 1

10

Innovation Size Distributions

1 0 0.5 1 1.5 Log Rank 2 2.5 3

Scherer et al. Analysis of Innovation Returns

Source: Scherer, Harhoff and Kukies, 2000, Uncertainty and the size distribution of rewards from innovation, JEE, 10: 175-200.

Scherer et al. continued

Hill Estimator: Consider n observations of a random variable Xi, and denote by X[i] the order statistics X[1]X[2] X[n]. Then the Hill estimator is defined as follows:
H ( k , n)
k 1 / k (ln X [i ] i 1

ln X [ k 1] ).

1.20

3.00

1.00

2.50

0.80

2.00

alpha

0.60

alpha
1 10 k 100

1.50

0.40

1.00

0.20

0.50

0.00

0.00 1 10 k 100 1000

Hill estimator applied to Harvard University patent portfolio data used in Scherer (1998) (left), and to Trajtenbergs (1990) patent citation data (right).

Percolation diagram in technology-performance space. Lattice sites are filled at random. A site is viable when it connects to the baseline.

Probability of a random site being on the infinite cluster P as a function of the percolation probability q

pc

Convergence, divergence and shortcuts, and two methods of defining a technology's competitiveness.

New innovations are generated with probability p in a region d units above and below the technological frontier.

Innovation search space

Near disjoint regions represent inventions, far off discoveries science, and clusters that can never be connected to the baseline science fictions.

A cluster of simultaneous invention occurs when a disjoint island of invention is suddenly joined to the frontier by a single 'cornerstone' innovation.

Screen Shot of Run with Search Radius 8

Deadlocking Statistics

10

10 9 8 7 6 5 4 3 2 1 0
4

number of deadlocked runs

9 8 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 search radius

0.523 0.548 0.573 0.598 0.623 0.648

1 7

0.673
10 13 16

Number of runs, which deadlock out of batches of ten for different values of the search radius. q=0.593.

Number of deadlocked runs out of ten as a joint function of the search radius and the percolation probability q.

19

sea

rch radi u

0.698

The mean height of the BPF attained after 5000 periods as a function of the search radius and percolation probability q.

350 300 250 200 mean height 150 100 50 0 0.733 0.703 0.673 0.643 0.613 0.583 0.553 q

10

13

16

0.523

search radius

19

Size distribution of innovations (left) and rank-order distribution (right, double-log scale), q=0.603, m=10.
200 180 160

100

number of cases

120 100 80 60 40 20 0

innovation size
1 7 13 19 25 31 37 43 49 55 61 67 73 79 85 91 97

140

10

1 1 10 100 rank (radius=10) 1000 10000

innovation size

Hill Estimators q=0.6, 0.645

Hill estimator of Pareto for innovation distribution generated with q=0.6 and m=5 plotted on a double-log scale for values of k up to 90% of number of observations.

Hill estimator of Pareto for innovation distribution generated with q=0.645 and m=5 plotted on a double-log scale for values of k up to 90% of number of observations

Hill Estimator q=0.695

Hill estimator of Pareto for innovation distribution generated with q=0.695 and m=5 plotted on a double-log scale for values of k up to 90% of number of observations.

LD Plot q=0.6
LD plot for innovation distribution generated with q=0.60 and m=5 (original data and aggregated data in blocks of 10, 100 and 200 observations).

LD Plots q=0.645, 0.695

LD plot for innovation distribution generated with q=0.645 and m=5 (original data and aggregated data in blocks of 10, 100 and 200 observations).

LD plot for innovation distribution generated with q=0.695 and m=5 (original data and aggregated data in blocks of 10, 100 and 200 observations).

Temporal clustering: Innovation count time series for a threshold of 2 (left) and 10 (right) for a run with search radius 5.
12 5

10 4

8 3

2 4

1 2

0 1000 1200 1400 1600 1800 2000

0 1000 1200 1400 1600 1800 2000

Arrival rate and overdispersion index for search radius m and threshold theta for radical innovations

0.25
Arrival Rate

0.15 0.1 0.05 0 1 3 th e 5 ta 8 67 5 m 4 9

100 50 0 76 54 3 21 m 3 5 20

20 3 2

98

theta

Overdispersion

0.2

150

Space-time plot of innovations: Moran clustering index highly significant

Technology space time

Space-time clustering of cylinder sizes of Cornish steam engines (Nuvolari and Verspagen 2003)

Conclusions
We can maximize our ignorance of technology space by percolating it with an exogenous percolation probability q We can impose the cumulativeness condition by requiring viable technologies to trace a path back to the baseline We can impose blindness and localness of the R&D search process by using m-neighborhoods of the BPF with uniform prob of testing sites Nevertheless we obtain, instead of a completely random innovation process, spatial and temporal clustering of innovations Innovation size distributions are highly skewed and possibly fat tailed. Near the critical q they appear to be Pareto, for higher q probably lognormal

Outlook
Endogenize R&D effort and targeting using agent-based model Endogenize q along lines of Bak-Sneppen model