Evolving Networks of Inventors

In this paper a model for the formation of strategic alliances is studied. Innovation results from the recombination of knowledge held by the partners to the collaboration, and from the history of their collaboration. Innovation brings partners closer together, while at the same time the repetition of partnerships fosters trust and helps improving the outcome of each round of cooperation. A tension exists between innovating with people I know in order to reduce uncertainty at the expense of the net benefit fromour joint effort, and innovating with strangers with whom the outcome of joint innovation can be greater but at a larger risk of failure. This “organized proximity”, built through the experience of cooperation, can be at the origin of strongly structured networks of innovation, where agents’ relations focus on limited cliques of partners. (JEL Classification: L14, Z13, O3, Keywords: Networks, Innovation, Network Formation, Knowledge)