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 13: A Distributed System of Innovation: The Italian Evidence in the Second Part of the Twentieth Century

Cristiano Antonelli and Federico Barbiellini Amidei

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


This book elaborates the localized technological change approach and implements it with the notion of pecuniary knowledge externalities so as to appreciate the role of external factors in the generation and exploitation of technological knowledge. We have implemented a model, according to which firms pulled by increasing demand and wages, may introduce technological innovations that can increase total factor productivity only if, when and where external knowledge is available at costs that are below equilibrium. The model of localized technological change cum pecuniary knowledge externalities identifies the key conditions of the dynamics of technological change in the cost equation of the generation of technological knowledge and in the profit equation for its exploitation, affecting the output elasticity of inputs, but not their sum in the standard production function. In so doing, we have reversed the analytical core of the new growth theory and elaborated a frame that can account for the variety of specific contextual conditions that may or may not lead to the actual introduction of productivity enhancing technological innovations. The research aimed to supply the basic analytical tools and the framework to provide a coherent interpretation of the excellent Italian long-term growth performance in the post-World War II era, highlighting the central role of the Italian distributed innovation system in sustaining fast rates of introduction of directed technological change. The emergence, during the golden age era, and the full functioning until the early 1990s, of a distinctive distributed innovation system based both upon intensive specialization and division of...

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