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Top1. Introduction And Objectives
Innovation is widely recognised a driver for economic growth and technological progress (Soete & Freeman, 2007; European Commission, 1995, 2004; Schumpeter, 1994; Akcomak & Ter Weel, 2009; OECD, 2007). As such it is usually associated with the currently predominant market structure, a free, open market with many sellers and many more buyers (Burks, 1969). Innovation conditions, innovation diffusion and innovation patterns have therefore been analysed and researched extensively in such markets, mainly in order to better understand how to influence these.
The present work attempts to extend the scope of this research to market situations that differ substantially from these traditional cases. Strong governmental needs in certain areas can create temporary monopsony markets. These tend to be limited in time since with market maturation, newly developed skills, services, tools and products create new markets and customers. However, during the monopsony period, governments usually try to use their special situation to spur innovation and create competitive advantage. Part of the space market can be described as showing the main elements of a governmental monopsony market (Szajnfarber & Weigel, 2007; Summerer, 2009).
This paper investigates the innovation dynamics in such a very specific market situation: a monopsony market with a governmental monopsonist. Section 2 therefore describes the theoretical foundations of innovation in a complex adaptive system and refers to the context of the research. Section 3 introduces the concept of a monopsony and then shows that some of the specifics of the European space sector are suitable to be modelled as a governmental monopsony market. Section 4 presents the methodology of the research. The market is modelled with an agent-based model with sellers (innovators or imitators) and buyers. Innovation as such is modelled as a dynamic vector. The use of a small-world network is motivated and described and the details of the adaptation of the original model from a transcription of a traditional, competitive oligopoly market structure to a monopsony market are provided, including a theoretical justification of the approach. Section 5 presents the results of model simulations, including the analysis how different strategies of the monopsonist influence the key innovation performance indicators of the overall market.