The Dynamics of Knowledge Externalities
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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.
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Chapter 4: The Role of External Factors in the Localized Generation of Technological Knowledge

Cristiano Antonelli and Federico Barbiellini Amidei


4.1 FROM TECHNOLOGICAL EXTERNALITIES TO PECUNIARY KNOWLEDGE EXTERNALITIES The aim of this chapter is to explore the role played by external knowledge into the generation of new technological knowledge. The traditional analysis originating from the contributions of Nelson (1959) and Arrow (1962a) and implemented by the methodology elaborated by Griliches (1979, 1992) and Jaffe (1986), rests upon the notion of knowledge as a public good and, consequently, the notion of technological externalities applies. In this approach, knowledge spills over into the ambient and it is not necessary to have any interaction between ‘inventors’ and ‘imitators’ or ‘knowledge producers’ and ‘knowledge users’. Such knowledge externalities stem from a number of key characteristics of technological knowledge as an economic good, that is to say, non-divisibility, non-appropriability, non-rivalry in use and non-excludability. Such pervasive technological externalities in the generation and exploitation of technological knowledge make it difficult for the market to provide incentives and to organize the production and dissemination of knowledge. There is a vast literature exploring the implications in terms of market failure and articulating the need for public subsidies. If knowledge is a public good or, as lately articulated in the new growth theory, a quasi-public good, the notion of ‘technological externalities’ can apply. Once discovered, in fact, technological knowledge can be accessed and used freely by all parties. Imitators can easily take advantage of knowledge generated by third parties: inventors can retain only a share of the stream of economic benefits that stem from its economic applications. At least...

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