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 3: The Localized Generation of Technological Knowledge

Cristiano Antonelli and Federico Barbiellini Amidei

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


The localized approach can be stretched so as to implement a broader understanding of what ignites and conditions the generation of technological knowledge. In the localized technological change approach, the introduction of innovation is the changing result of a series of circumstances and factors that affect the generation of technological knowledge. The incentive to innovate is translated into innovating only if a set of rather specific, complementary conditions about the generation of technological knowledge are satisfied. The firm can react creatively by introducing new technology and, therefore, can innovate only if there is a stock of easily accessible knowledge. This depends upon two conditions. First the internal learning conditions and the ability of each firm to mobilize and valorize the learning processes. The second key factor to be considered is whether and how the firm can access the sources of external knowledge. External knowledge is, in fact, an indispensable complementary input in the recombination process that leads to the generation of new technological knowledge. External knowledge plays a key role that becomes all the more relevant when the prevalent size of firms is small. In the Arrovian approach, technological knowledge is mainly viewed as the result of spontaneous and automatic learning processes. Localized technological change impinges upon this approach and praises the role of the competence and tacit knowledge based upon learning processes. The Arrovian analysis of learning as the basic engine for the accumulation of technological knowledge (Arrow, 1962b), in fact, has been greatly qualified and sharpened by the...

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