Micro-Heuristics, Macro-Strategy: An Agent-Based Model of Contingent Build, Partner, and Acquire Choice in Legacy-to-Emerging Market Transitions

Abstract An established firm whose core market is declining while a new one opens must decide how to source the capabilities it demands: build them internally, partner with a firm that has them, acquire such a firm, or wait. We study this decision with an agent-based model of industry evolution in which heterogeneous, boundedly rational incumbents follow evidence-based routines and face market selection while crossing from a declining legacy market into a growing one. Because the model describes a generic transition, we use it for \emph{generative foresight}: reasoning forward from micro-rules to the market structures they make likely, and testing its headlines by removing a supposed cause, randomizing an alternative cause, or decomposing its channel. Rivals' acquisitions change which routes are feasible, and the route mix follows feasibility rather than preference. In the plane spanned by the costs of building and partnering, build, partner, and acquire each produce the most market leaders in a region; per entrant, however, acquisition at its baseline cost leads in most of that plane, partnering keeps the region where it is cheap, and build's region reflects how often firms build. Early entry carries a time-in-market advantage that survives randomizing entry order and stays positive at every pace tested. Among entrants, acquisition has the highest end-of-run leader-or-survivor rate at the calibrated build scale; partnering overtakes it when builds start larger. The model separates three questions that sourcing comparisons often merge: which routes are feasible, which produces the most leaders, and how parents entering by each route fare.