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Complexity and Innovation: Social Interactions and Firm Level Total Factor Productivity




The analysis of social interactions as drivers of economic dynamics represents a growing field of the economics of complexity. Social interactions are a specific form of interdependence whereby the changes in the behavior of other agents affect the structure of the utility functions for households and of the production functions for producers. In this paper, we apply the general concept of social interactions to the area of the economics of innovation and technological change. In particular, we discuss how both the knowledge spillovers literature and the Schumpeterian notion of creative reaction can be reconciled within a general framework building on the concept of social interactions within complex dynamics. The paper presents an empirical analysis of firm level total factor productivity (TFP) for a sample of 7020 Italian manufacturing companies observed during years 1996-2005. We show that changes in firm level TFP are significantly affected by localised social interactions. Such evidence is robust to the introduction of appropriate regional and sectoral controls, as well as to econometric specifications accounting for potential endogeneity problems. Moreover, we find evidence suggesting that changes in competitive pressure, namely the creative reaction channel, significantly affect firm level TFP with and additive effect with respect to localised social interactions deriving from knowledge spillovers.

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  • Cristiano, Antonelli & Scellato, Giuseppe, 2007. "Complexity and Innovation: Social Interactions and Firm Level Total Factor Productivity," 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 200709, University of Turin.
  • Handle: RePEc:uto:labeco:200709

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    References listed on IDEAS

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    Cited by:

    1. Lepratte, Leandro, 2011. "Sistemas sociotécnicos, innovación y desarrollo
      [Sociotechnical systems, innovation and development]
      ," MPRA Paper 33559, University Library of Munich, Germany.
    2. Agnieszka Gehringer, 2011. "Pecuniary Knowledge Externalities across European Countries—Are there Leading Sectors?," Industry and Innovation, Taylor & Francis Journals, vol. 18(4), pages 415-436.

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