The rhythms of high technology firms: nonlinear dynamics and strategic analysis

Summary form only given as follows. The focus of this discussion is the implications (both theoretical and practical) of a new generation of tools and concepts derived from advances in nonlinear dynamical systems (e.g. chaos and complexity of studies). Primary among these tools are simulations involving “artificial agents” who learn and adapt through processes represented by “genetic algorithms” and “cellular automata”. These tools in the hands of students of strategic management offer a direct challenge to the dominance of neo-classical economic theory in game theoretic or industrial organization approaches to strategic choice of high tech firms. While nonlinear simulations have been limited thus far to a narrow range of specific issues, the ramifications are far reaching. For example, studies of systematic learning (using annealing and/or co-evolving automata) merely assumed to prevail. In competitive (i.e. Nash) solutions. As one theorist explained “they provide an artificial reality check for economists”. Moreover, the explorations of these nonlinear dynamics at the level of firms as well as entire industries, explicate curious processes, such as technological “lock-in” and “lock-out” which are currently merely represented as “network externalities”. These analytics also signal a firm when and whether to enter the heretofore intractable dominant design contest