Knowledge Diffusion and Innovation

Knowledge Diffusion and Innovation

Modelling Complex Entrepreneurial Behaviours

Piergiuseppe Morone and Richard Taylor

Modern economies are described as ‘knowledge based’. This book investigates the meaning of such a statement, assessing the relevance of knowledge and the channels through which knowledge is exchanged, both from a theoretical and an empirical perspective.

Chapter 2: Knowledge Economy: Old and New Issues

Piergiuseppe Morone and Richard Taylor

Subjects: economics and finance, economics of innovation, evolutionary economics, innovation and technology, economics of innovation


Due to the growing competitive pressure coming from emerging economies, modern manufacturing industries in developed countries have progressively shifted their focus from the physical processes of production to the design and marketing phases and, more relevantly, to the innovation of new products and production processes. In fact, in a globalized and competitive environment, the only viable way for firms operating in rich countries to enhance competitiveness is constantly to empower their innovative capabilities. Innovation, defined as the process by which firms master and put into practice new product designs and manufacturing processes (Nelson and Rosenberg 1993), has to be understood as a process in which ‘new knowledge or new combinations of old knowledge are embodied in products and production processes and possibly introduced into the economy’ (Oerlemans et al. 1998, p. 4). Hence, innovation crucially involves the use of existing knowledge, as well as the ability to generate and acquire new knowledge (Howells 2002, p. 872). This view, shared by many scholars, supports the idea that firms progressively rely on knowledge as a key input of successful and long-lasting innovating activities (Pinch et al. 2003; Forsman and Solitander 2003). In other words, firms’ long-term competitiveness is highly dependent on their ability to innovate and, therefore, on their ability to enhance their knowledge base (Florida 1995; Cooke 2001; Malmberg and Maskell 2002).1 The knowledge base of a firm could be defined as the collective character of the knowledge which depends both on individual human resources and on the mechanisms of...

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