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 5: The Role of External Factors in the Localized Exploitation of Technological Knowledge: Localized Appropriability and Directed Technological Innovation

Cristiano Antonelli and Federico Barbiellini Amidei

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


The analysis of knowledge exploitation provides further elements of insight into the understanding of the introduction of technological innovations (March, 1991). In the Schumpeterian approach, technological knowledge can be appropriated and exploited effectively through downstream integration both in the creation of new firms and by incumbents that can take advantage of existing barriers to entry and hence to imitation. This takes place when innovators are large corporations that enjoy the advantages of barriers to entry based upon increasing returns to scale (Schumpeter, 1942). Existing barriers to entry become barriers to imitation for new products. Lead times provide innovating incumbents with the opportunity to reap the advantages of economies of scale before potential competitors are able to imitate the innovation. The corporation is the institution that provides innovators with the opportunity and the incentives to appropriate and exploit technological knowledge (Chandler, 1962, 1977, 1990). David Teece has much enriched the Chandlerian analysis of embodied appropriation. He suggests that firms can try to exploit their technological knowledge by bundling it with complementary assets that are under their exclusive control (Teece, 1986, 1998, 2000). According to this approach, firms try to search for complementary assets depending on the characteristics of their proprietary knowledge. The bundling of knowledge with other assets that are under a firm’s exclusive command becomes an effective strategy to appropriate technological knowledge and hence to exploit it better. 34 M2517 - ANTONELLI PRINT.indd 34 26/01/2011 08:43 Localized exploitation of technological knowledge 35 This analysis of knowledge exploitation can be...

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