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Endogenous Innovation

The Economics of an Emergent System Property

Cristiano Antonelli

This ground-breaking new book builds upon the Schumpeterian creative response. The author shows that firms, in out-of-equilibrium conditions, try and react by means of introducing innovations. The success of their reaction is contingent upon their access conditions to knowledge, which are shaped by the system in which they operate. The emergence of new innovations can, in turn, knock firms further out-of-equilibrium and cause changes in the system properties that govern their access to external knowledge. This path dependent loop of interactions between the system properties and the individual actions of firms, accounts for endogenous innovation and the dynamics of the system.
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Chapter 9: Knowledge governance, pecuniary knowledge externalities and total factor productivity growth

The Economics of an Emergent System Property

Cristiano Antonelli

Extract

Building on Schumpeterian and the Marshallian legacies, this chapter elaborates a model of endogenous growth. It provides a systemic explanation for the levels and rates of total factor productivity growth. The generation of technological knowledge consists in the recombination of existing items of heterogeneous technological knowledge that are necessarily possessed by a myriad of agents. As such, much technological knowledge is external to each agent, and yet an essential input. In this context knowledge governance mechanisms play a key role in the identification, recollection and provision of the specific items of necessary technological knowledge external to each agent. Effective knowledge governance mechanisms engender pecuniary knowledge externalities that take place, mainly at the regional level, when and where existing units of external knowledge can be identified, accessed, unbundled and reused at costs that are below equilibrium for the recombinant generation of new technological knowledge.

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