The Dynamics of Knowledge Externalities

The Dynamics of Knowledge Externalities

Localized Technological Change in Italy

Cristiano Antonelli and Federico Barbiellini Amidei

This book elaborates a new dependent and localized growth theory based upon knowledge externalities by making two important contributions. Firstly, it elaborates the hypothesis that total factor productivity growth stems from pecuniary knowledge externalities that consist in the access to localized external knowledge, at costs that are below equilibrium levels. Secondly, it implements the economic analysis of complex dynamic systems with a novel approach to understanding the role of knowledge interactions and knowledge governance mechanisms in the generation of new technological knowledge within economic systems characterized by webs of interdependence.

Chapter 2: The General Framework

Cristiano Antonelli and Federico Barbiellini Amidei

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


2.1 INTRODUCTION This part of the book elaborates a microeconomic framework at the crossroad of the Schumpeterian and Marshallian traditions of analysis to explain economic growth based upon the role of technological change (Schumpeter, 1911 [1934]). While much of the economics of growth impinges upon an equilibrium approach at the aggregate level, this book uses the Marshallian analysis of partial equilibrium to elaborate a microeconomic Schumpeterian approach that analyses innovation as the consequence and the cause of self-organizing out-of-equilibrium processes. In so doing, it presents a methodological update of the localized technological change approach, stressing the systemic role of pecuniary knowledge externalities. Such externalities become available within qualified systemic conditions such as industrial districts and technological filieres providing abundant and cheap access to external knowledge, an essential input into the recombination and generation of new technological knowledge. This approach is relevant as it provides an interpretation of the Italian puzzle of very low levels of expenditure in R&D and yet high levels of total factor productivity growth. Our basic argument is that unexpected changes in product and factor markets induced myopic firms, constrained by substantial irreversibility of production factors, to try to innovate. Their localization into (sub-) systems characterized by qualified mechanisms of knowledge governance and hence access to external knowledge at costs that were below equilibrium levels, made their reaction creative as opposed to adaptive. Such localization paved the way to the successful generation of technological knowledge and the eventual introduction of localized technological changes by firms, embedded...

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