Economics of Reciprocal Networks: Collaboration in Knowledge and Emergence of Industrial Clusters

Collaboration in knowledge gives rise to new patterns of competition, since knowledge is created with cost in an organization but is transferred without additional cost under a collaborative agreement. Simulation analysis based on a specific market network model successfully explains the emergence of industrial clusters under this assumption. When a significant number of markets are connected to form a network, Cluster Competition leads to uneven production levels in each market. An industrial cluster emerges even if markets are evenly connected with identical conditions. This work also shows that a Free Scale Network of markets results in extreme divergence of production levels in each node. The conditions of each market are the same ex ante, but one fortunate market grows to produce a huge volume of production for the entire network ex post. This effect acts as an invisible hand to create uneven development of economic locations.