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The governance of localized knowledge externalities

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This paper articulates the hypothesis that there is an optimal size of knowledge pools. Too little a density of innovation activities reduces the accessibility of external knowledge. Too large a density enhances congestion and reduces appropriability. Firms can benefit from actual increasing returns stemming from the indivisibility, replicability and non-exhaustibility of knowledge only when the size of innovation networks is comprised between the two extremes. The empirical evidence confirms that the output elasticity of knowledge, included in a typical Griliches production function, is itself a quadratic function of the size of innovation networks. Knowledge externalities do trigger increasing returns that are external to each firm, only within a well defined interval. Knowledge externalities are a property of the system into which firms are embedded. As such they are endogenous to the system and likely to exhibit specific properties related to the changing characteristics of the system itself. The quality of knowledge governance mechanisms in place plays a key role in assessing the actual size of the net positive effects of knowledge externalities.

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  • Antonelli, Cristiano & Patrucco, Pier Paolo & Quatraro, Francesco, 2008. "The governance of localized knowledge externalities," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 200801, University of Turin.
    • Handle: RePEc:uto:labeco:200801
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    Cited by:

    1. Metcalfe, Stan & Ramlogan, Ronnie, 2008. "Innovation systems and the competitive process in developing economies," The Quarterly Review of Economics and Finance, Elsevier, vol. 48(2), pages 433-446, May.
    2. Cristiano Antonelli, 2010. "Pecuniary Externalities and the Localized Generation of Technological Knowledge," Chapters, in: Ron Boschma & Ron Martin (ed.), The Handbook of Evolutionary Economic Geography, chapter 7, Edward Elgar Publishing.
    3. Eric BROUILLAT & Yannick LUNG, 2010. "Spatial distribution of innovative activities and economic performances: A geographical-friendly model," Cahiers du GREThA (2007-2019) 2010-11, Groupe de Recherche en Economie Théorique et Appliquée (GREThA).
    4. Cristiano, Antonelli & Ferraris, Gianluigi, 2009. "Innovation as an Emerging System Property: an Agent Based Model," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 200911, University of Turin.
    5. Christophe Carrincazeaux & Frederic Gaschet, 2015. "Regional Innovation Systems and Economic Performance: Between Regions and Nations," European Planning Studies, Taylor & Francis Journals, vol. 23(2), pages 262-291, February.
    6. Cristiano Antonelli, 2011. "The Economic Complexity of Technological Change: Knowledge Interaction and Path Dependence," Chapters, in: Cristiano Antonelli (ed.), Handbook on the Economic Complexity of Technological Change, chapter 1, Edward Elgar Publishing.
    7. Stan Metcalfe & Dimitri Gagliardi & Nicola De Liso & Ronnie Ramlogan, 2012. "Innovation Systems and Innovation Ecologies: Innovation Policy and Restless Capitalism," Openloc Working Papers 1203, Public policies and local development.
    8. Marrocu, Emanuela & Paci, Raffaele & Usai, Stefano, 2013. "Proximity, networking and knowledge production in Europe: What lessons for innovation policy?," Technological Forecasting and Social Change, Elsevier, vol. 80(8), pages 1484-1498.

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