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Agent-based Simulation of Firms' Learning and Workforce Dynamics

This study explores the dynamics of firms' learning and workforce skill sets through agent-based simulation. It investigates the impact of employment policies on long-term survival in a dynamic environment, focusing on knowledge-based jobs and the boundaries of firms.

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Agent-based Simulation of Firms' Learning and Workforce Dynamics

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  1. Knowledge-Based Jobs and the Boundaries of FirmsAgent-based simulation of Firms Learning and Workforce Skill Set Dynamics Edoardo Mollona -mollona@cs.unibo.it David Hales - dave@davidhales.com Department of Computer Science University of Bologna Italy

  2. The DELIS Project • Dynamically Evolving Large-scale Information Systems (Internet, wireless networks, complex self-organising software etc) • E.U funded, Framework 6, IST, IP • Including 20 European Partners – including industrial partners • Bologna Involvement includes – biological and socially inspired models and methods • Evolutionary agent-based models (intelligent agents, evolving, macro and micro elements)

  3. Strategic assets & Interfirms Heterogeneity • Hidiosincratic resource endowments explain interfirm heterogeneity (Penrose, 1959; Barney, 1986, 1996). • Firm-specific knowledge • Firm-specific network of skills • Dynamic environment emphasise need for dynamic capabilities [Teece, Pisano & Shuen] • Evolutionary approach • Exploratory modelling: where do we start from?

  4. Key question • We define a dynamic environment as: • Skills are randomly assigned different strategic value in different point of time • Firms require different amount of each skills in different points in time • We speculate on how different employment policies may affect long-term survival in a dynamic enviroment.

  5. Knowledge-Based Jobs • The jobs we consider have the following features: • Individual skills involved are valuable when embedded within an organisational network. • Individual skills contribute to the accumulation of socially-embedded knowledge • Value of individual skills depends on collective learning processes leading to the accumulation of firm-specific knowledge • Value of individual skills depends on time spent within an organisation

  6. Outline of the FirmWorld Model • Agent-based with three kinds of agent • Company (or Firm) agents (50) • Employee (or Worker) agents (200) • A single shared Environment (1) • Firms desire to increase profit • Workers desire to increase pay and job security • They interact within a shared environment

  7. Each “Month” in FirmWorld • 1. Companies recruit / fire employees • 2. Income distributed to companies • 3. Salaries and fixed costs paid • 4. Bankrupt companies removed • 5. New companies created

  8. Evolution in the FirmWorld • Firm income is determined by • The composition of its workforce • Skill-set (number with each skill type) • Specificity (time in firm current firm) • The environmental “master model” which indicates the optimal workforce composition • Firms that can not meet their costs go bankrupt

  9. Evolution in the FirmWorld • When a firm goes bankrupt a new one is formed, it copies the characteristics of an existing firm with high profit (replication) • The characteristics determine hiring and firing policies and the believed optimal workforce skill set (the company model) • These characteristics define a set of firm “genes” in an evolutionary process • Copied genes are changed slightly introducing variation (mutation)

  10. Employee Agents • Have a fixed single skill type [1..5] • Have an associated non-fixed specificity [1..2] • increases each month worker stays in a company • reset to “1” if they move or become unemployed • Select jobs based on best salary and security • May have permanent or non-perm. contract • Can not be fired by the company • “security bonus” increases perceived size of salary to employee (100%) • Permanent workers less likely to look for new jobs (75%)

  11. Company Agents • Store a “company model” which specifies believe optimal workforce skill-set • Stores a set of characteristics (parameters) that effect hiring and firing policies • Job offers based on perceived scarcity of skills and perceived added value of prospective employee • If can not meet costs company goes bankrupt and releases all employees

  12. Environment Months Company 1 Master Model Employed Agents 1 2 3 4 5 6 7 8 Company Models Company 2 Unemployed Agents FirmWorld Schematic

  13. Employee Value Convex exp. Specificity function (“learning curve”) Linear Marginal Return function (one for each skill type)

  14. Results Proportion of long-term workers

  15. Results

  16. Discussion: what is happening in the dynamic economy of the FirmWorld model? • For sure we know that life is hard...and short • Survival strategy seems to include: • Hire long term workers as they become scarce. • Exploit firm-specific knowledge. • Probably, in the dynamic environment gains from adapting skill endowments become more difficult to attain. • In the dynamic economy, perception of scarcity leads to long-term hiring policie, which, in turn, reinforces perceived scarcity.

  17. Discussions: next steps • What if learning was quicker? • Experiment with organisational learning rather than inter-generational learning • Network • Dynamics of firm-specific knowledge depends on how skills are differently located within organisational networks

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