Antonelli, C., Ferraris, G., (2017), The Marshallian and Schumpeterian microfoundations of evolutionary complexity: An agent based simulation model, in: Pyka, A.,Cantner, U. (eds.), Foundations of Economic Change. A Schumpeterian View on Behaviour, Interaction and Aggregate Outcomes, Springer, Economic Complexity and Evolution, Heidelberg, Berlin and New York, pp. 461-500.

The analysis of the Marshallian and Schumpeterian microfoundations of endogenous innovation enables to draw a line between the new emerging evolutionary complexity from biological evolutionary analysis and to overcome its limits. The paper integrates the Marshallian process of imitation and selection with the Schumpeterian creative response. In Marshall initial variety is given and exogenous, the dynamics of the process is driven by the selective diffusion of the best practice and long-term equilibrium stops the generation of externalities; firms are not expected to try and react to unexpected mismatches between planned and actual product and factor market conditions. In Schumpeter firms are allowed to try and react; the quality of knowledge externalities supports their creative response and may keep the system in a self-sustained process of growth. The Schumpeterian creative response can be regarded as a special case of the Marshallian dynamics that takes place when externalities –available to all firms including most performing ones- enable the introduction of innovations that account for the reproduction of superior performances and variety. The levels of reactivity of agents and of the quality of knowledge externalities, provided by the system, account for the growth of output and productivity. This hypothesis is tested by means of an agent based simulation model that shows how these microfoundations of endogenous innovation are able to generate aggregate dynamics based upon the interaction between individual decision making and system properties.