Knowledge Networks and Resilience: Under Which Conditions Regional Economies Overcome External Shocks

Abstract In recent years, due to the increasing instability of economic systems, the debate among scholars and policymakers about restoring economic growth has centred around the concept of resilience—that is, the ability of a system to anticipate, prepare for, respond to, and recover from a shock. This work aims to contribute to this debate by developing an agent-based model that explores the conditions under which economic systems successfully cope with external shocks and achieve a long-term growth path. The focus is on the role of network structures in regional economic resilience. The findings show that the network structures that best support long-term regional growth in stable conditions are not necessarily those that promote resilience and recovery in the aftermath of a shock. In stable environments, or when non-specialized regions experience only mild disruptions, a small-world network, characterized by high clustering and short average path lengths, proves most effective. However, in the case of a shock affecting a specialized regional economy, openness becomes the critical factor. These structures indeed provide access to diverse knowledge sources and alternative pathways for adaptation.