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Knowledge externalities and demand pull: The European evidence

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This paper elaborates the microeconomic foundations of the demand pull hypothesis stressing the role of vertical knowledge externalities stemming from the complementarity between know ledge interactions and user-producer transactions. The increase in the demand can pull the rate of technological change in the system when it concerns the derived demand of innovative sectors. In this framework, technological change is an emergent property of any dynamic system, where external knowledge made available by each agent plays a key role in the introduction of innovations by each other agent. Demand pulls the introduction of innovations when and where it comes from innovative customers. Using input output tables that grasp user-producer interactions, the paper provides an empirical test of these hypotheses for 15 European countries in the years 1995-2007. The evidence confirms that the in crease of total factor productivity of the upstream supplying sectors is positively influenced by the sector-level derived demand, according to the rates of introduction of innovations and to the intensity of their user-producer interactions. The policy implications of the analysis enable to elaborate and implement the notion of a ‘competent’ public demand.

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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 201214.

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Length: 29 pages
Date of creation: Sep 2012
Handle: RePEc:uto:labeco:201214
Contact details of provider: Web page: http://www.unito.it/
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