Networks, spillovers and models of economic growth

In this paper we investigate the innovativeness of a network of firms, each of which can experience innovation spillovers (i.e. technological externalities) from its neighbours. A cellular automata framework is used to provide a new theoretical
method for analysing such networks. Considering network spillovers produces a nonlinear relationship between the strength
of spillovers and overall innovativeness, as opposed to the linear relationship we demonstrate in a standard representative firm model. The network model also allows a theoretical comparison of the common localised spillovers methodology of empirical studies with the global spillovers assumption typical of many endogenous growth models. We find that localised spillovers are not a simple size proportional scaling of the global case.