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 10: Structural Change and the Building of Systemic Interdependence: The Emergence of a Distributed Innovation System

Cristiano Antonelli and Federico Barbiellini Amidei

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


The process of structural change that accompanied technological change, had a crucial influence on Italian economic and innovative performance in the post-World War II era.1 The abundance of under-used labour in agriculture and the opportunities of employing it in more productive growing and emerging manufacturing industries made an important specific contribution to TFP growth, more and for longer than in the rest of Europe.2 Yet, the crucial process in the Italian structural change was the growth and development of a strong machinery industry. At the beginning of the 1950s, Italy stood out because of the high percentage of workers employed in agriculture.3 Furthermore, Italy had an elastic supply of labour and the relations prevailing in the labour market favoured the establishment of a long virtuous phase (destined to have a traumatic end in the late 1960s), in which wages grew more slowly than labour productivity, facilitating high profits which encouraged investment (see Figures 10.1–10.3). In the 1950s, Italy had the opportunity to ‘exploit’ the technological gap accumulated during the long Fascist dictatorship by taking part in Europe’s unequalled process of catching up on the United States.4 The process was, to a great extent, linked to the ability to adopt massproduction methods.5 On the basis of this opportunity, the growth of internal demand (higher per capita income, spreading of modern consumption patterns) was an important factor leading to intense technological diffusion in manufacturing, especially with investments increasing production capacity.6 Demand pull resulted in a significant lowering of average age and...

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