An evolutionary agent-based model of innovation and the risk-reward nexus

The present paper studies the relative roles of public and private agents in the innovation process and their rewards. Building on an evolutionary framework, we account for the generation of skills as an endogenous process in innovation development, in which different agents contribute to value generation, but some are able to extract value more than proportionally. By focusing on the division of risks and rewards between public and private agents under different scenarios, we study the mechanisms by which some private agents access innovation surplus profits, obtaining conceptual insights into how innovation and its financing leads to inequality.