Knowledge Workers, Communication, and Spatial Diffusion

Although local innovations may have little effect on the total production system of a nation, some generic technologies involve spillovers from one innovation to another, and from one sector producing the technology to others using it. Some key innovations may be complementary, giving rise to dynamic increasing returns to scale through clustered interdependencies among innovation, investments, information and knowledge. If the continuous upgrading and diversification of goods and services is extrapolated to the national level, innovation becomes endogenous within each country. As a result, the relative growth of internationally open economies is closely related to the ability to innovate and gain market shares, in contrast to neoclassical models that typically assume closed economies with exogenous technological change. Because newer models recognize that there is a constant flow of innovations coming from the competitive process itself, they are dynamic and sequential, and they indicate that no one unique equilibrium growth path usually exists.