Regional Economies and Innovative Performance as the Source of Competitiveness and Agglomeration: a System Dynamics Representation

This article makes use of the system dynamics to argue that a number of theories about the performance of territories, developed in the past 20 years, are more complementary than alternative; to demonstrate this, a model of local economy coherent with these schools is designed and simulated. According to these theories, the ability to produce and use knowledge is at the centre of regional competitiveness in the advanced world; the model shows the elements of the local economic system and how they have to work coherently towards the continuous process of innovation, needed to be successful. The model also shows that, due to the cumulative nature of this innovation process, it is possible to obtain equilibria with agglomeration, even in the presence of apparently very similar territories. When this is the case, structural policies, aimed at allowing lagging regions to better innovate and imitate external knowledge, are appropriate.