Collective knowledge production costs and the dynamics of technological systems

Abstract

Technological knowledge can be understood as a collective good only when its production requires the absorption and integration of external knowledge. Such external knowledge is the outcome of R&D investments that cannot be fully appropriated by firms and generate spillovers. The exploitation of such knowledge spillovers requires specific investments in knowledge communication and absorption, which brings about specific costs. These costs are affected by the structural and dynamic characteristics of technological systems in terms of the knowledge base, the variety of actors and the communication infrastructures and processes. This paper analyzes the costs of collective knowledge production and their implications for the way in which the firm chooses the mix of internal and external knowledge. This choice in turn shapes the evolution of technological systems.

Keywords:

• knowledge diffusion
• knowledge externalities
• innovation systems
• technological change
• technological communication

JEL Classification :

• O31
• O33

Acknowledgements

I acknowledge the financial support of the Collegio Carlo Alberto of the University of Torino through the funding of BRICK - Bureau of Research on Innovation, Complexity and Knowledge. I also thank Davide Consoli, Jacques Ravix, Laurel Smith-Doerr as well as the Editor and one anonymous referee of this Journal for useful suggestions and comments.

Notes

Partial appropriability is necessary for the benefits of knowledge spillovers to be exploited through technological communication and increasing returns to take place. However, such inappropriability cannot exceed a given threshold beyond which standard decreasing returns to technological communication and knowledge distribution start to apply. In fact, if inappropriability is higher than the threshold, the firms’ probability and opportunities to benefit from and appropriate the returns to their private investments in technological communication is decreasing and the profitability of being involved into collective processes of knowledge production and distribution starts to decrease as well.

There is an obvious gap between the variety and nuances of empirical cases and the situations accounted for by the microeconomic analysis presented in the paper. This can clearly cover only a part of the richer empirical evidence available. However, the scope of this paper is not to present the wide range of empirical conditions under which the governance of technological knowledge can take place. The object of this paper is rather to articulate a framework able to identify some stylized elements behind empirical cases.