Pecuniary knowledge externalities and innovation: intersectoral linkages and their effects beyond technological spillovers

Abstract

The aim of this paper is to discuss and to provide evidence for the existence of pecuniary knowledge externalities, considered here as the main cause of positive disequilibrium experience by downstream producers. The last effect, confirmed by the empirical analysis performed here, enriches the postulates of the model of growth through creative destruction due to P. Aghion and P. Howitt (1992, A model of growth through creative destruction, Econometrica 60, no. 2: 322–52), where only upstream producers generate innovations and downstream producers remain very much passive in front of the new technological knowledge generated externally.

Keywords:

• pecuniary knowledge externalities
• endogenous growth
• creative destruction
• input–output

Notes

For a survey of the relevant literature, see Nadiri (1993).

The discussion is related to firms. However, without loss of generality, the definition of external effects may be applied to any other group of economic actors, consumers and governmental institutions as well.

See Antonelli (2008a, 2008b).

See Gehringer (2011 and forthcoming).

Chandra and Sandilands (2006).

All the computations regarding the main estimation described by Equation (3) are based on the time span between 1994 and 2000, with the dependent variable given by the yearly rates of change of TFP, calculated for 1995 and 2000. However, in the robustness analysis, an extended time interval was applied, with a dependent variable represented by the average rates of change of TFP over two time periods 1995–1999 and 1999–2004, respectively.

The full list of industries as well as of the countries is included in Appendix 1.

A single country dimension has been adopted in Gehringer (2011), pointing the country-level specificities in the occurrence of PKE. A deeper investigation of the sectoral differences related to PKEs has been conducted in Gehringer (forthcoming). The latter analysis has led to the construction of a new sectoral taxonomy.

Relative SE expresses the relative, as opposed to the absolute, distance of the estimated coefficients to the true values of the coefficients.

For the influence of PKEs on the emergence of innovation systems and the direction of technological change, see Antonelli (2008b).