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Knowledge Complementarity and Fungeability: Implications for Regional Strategy

Complexity and fungeability are two specific aspects of knowledge indivisibility. Complexity matters when the production of new knowledge requires the combination of diverse and yet complementary bits of knowledge. Fungeability is found when some units of knowledge can applyin a variety of different contexts, different products and different processes. Both knowledge complexity and knowledge fungeability are the cause of increasing returns in the generation of knowledge. The governance of the distribution of knowledge instead is affected by decreasing returns to the variety of elements of knowledge. Exchanges in the markets for knowledge are limited by transaction costs. Internalization of different bits of knowledge is constrained by coordination costs. Firms can take advantage of knowledge complexity and fungeability by means of networking in regional space.

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Paper provided by University of Turin in its series 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 Carlo Alberto. WP series with number 200302.

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Length: 21 pages
Date of creation: Oct 2003
Date of revision:
Handle: RePEc:uto:labeco:200302
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