Knowledge Flows, Knowledge Externalities, and Regional Economic Development

  • Charlie Karlsson
  • Urban Gråsjö
Reference work entry


New knowledge generated by an economic agent in a region will tend over time to flow to other economic agents in the same region but also to economic agents in other regions. It is quite common in the literature to use the concept of knowledge spillovers for such knowledge flows, irrespective of whether they are intended or non-intended. The potential for intra-regional knowledge spillover effects depends on the volume and character of the generation on new knowledge in each region as well as of the general characteristics of the individual regional economic milieu, that is, those location attributes, which are regionally trapped and which include how well integrated it is with other regions. The larger this potential, the higher the probability that firms dependent upon knowledge spillovers will locate there and the higher the probability that entrepreneurs will take advantage of this potential to launch innovations and to create new knowledge-based firms. To the extent that firms and entrepreneurs can enjoy these knowledge spillovers, they represent an externality or more specifically a knowledge externality in the regional economy.

Great importance is in the literature attributed to knowledge spillovers and knowledge externalities as drivers of regional economic development. Some authors, for example, claim that regional variations in localized knowledge spillovers are one of the main reasons behind regional variations in innovation performance. Against this background, the purpose of this chapter is, based upon a general characterization of knowledge flows, to analyze the character of knowledge externalities and, in particular, their sources, their economic nature, their recipients, their mechanisms and channels, their geographic reach, and their economic consequences generally and for regional economic development in particular.


Knowledge Spillover Economic Agent Knowledge Externality Patent Citation Knowledge Flow 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


  1. Andersson ÅE, Mantsinen J (1980) Mobility of resources: accessibility of knowledge and economic growth. Behaviour Sci 25:353–366CrossRefGoogle Scholar
  2. Arrow KJ (1962) Economic welfare and the allocation of resources for invention. In: Nelson R (ed) The rate and direction of inventive activity. Princeton University Press, Princeton, pp 619–622Google Scholar
  3. Audretsch DB, Feldman MP (1999) Innovation in cities: science-based diversity, specialization and localised competition. Eur Econ Rev 43:409–429CrossRefGoogle Scholar
  4. Audretsch DB, Feldman MP (2004) Knowledge spillovers and the geography of innovation. In: Henderson JV, Thisse JF (eds) Handbook of urban and regional economics, vol 4. Elsevier, Amsterdam, pp 2713–2739Google Scholar
  5. Breschi S, Lissoni F (2001) Localized knowledge spillovers vs innovative milieux: knowledge tacitness reconsidered. Papers Region Sci 80:255–273CrossRefGoogle Scholar
  6. Buchanan JM (1965) An economic theory of clubs. Economica 32:1–14CrossRefGoogle Scholar
  7. Chambers RG (1988) Applied production analysis: a dual approach. Cambridge University Press, CambridgeGoogle Scholar
  8. Cohen WM, Levinthal DA (1989) Innovation and learning: the two faces of R&D. Econ J 99:569–596CrossRefGoogle Scholar
  9. Cornes R, Sandler T (1986) The theory of externalities, public goods and club goods. Cambridge University Press, CambridgeGoogle Scholar
  10. Glaeser EL et al (1992) Growth of cities. J Polit Econ 100:1126–1152CrossRefGoogle Scholar
  11. Griliches Z (1992) The search for R & D spillovers. Scand J Econ 94(Suppl):29–47CrossRefGoogle Scholar
  12. Grossman GM, Helpman E (1991a) Quality ladders and product cycles. Quart J Econ 106:557–586CrossRefGoogle Scholar
  13. Grossman GM, Helpman E (1991b) Innovation and growth in a global economy. The MIT Press, Cambridge, MAGoogle Scholar
  14. Helpman E (ed) (2008) Institutions and economic performance. Harvard University Press, Cambridge, MAGoogle Scholar
  15. Henderson JV (1974) The size and type of cities. Am Econ Rev 64:640–656Google Scholar
  16. Jacobs J (1969) The economy of cities. Random House, New YorkGoogle Scholar
  17. Jaffe A (1986) Technological opportunities and spillovers of R&D: evidence from Firm’s patents, profits, and market value. Am Econ Rev 76:984–1001Google Scholar
  18. Jaffe A (1989) Real effects of academic research. Am Econ Rev 79:957–970Google Scholar
  19. Jaffe A, Trajtenberg M, Henderson R (1993) Geographic localization of knowledge spillovers as evidenced by patent citations. Quart J Econ 108:577–598CrossRefGoogle Scholar
  20. Johansson B (2005) Parsing the menagerie of agglomeration and network externalities. In: Karlsson C, Johansson B, Stough RR (eds) Industrial clusters and inter-firm networks. Edward Elgar, Cheltenham, pp 107–147Google Scholar
  21. Kaldor N (1970) The case for regional policy. Scott J Polit Econ 17:337–348CrossRefGoogle Scholar
  22. Karlsson C, Manduchi A (2001) Knowledge spillovers in a spatial context – a critical review and assessment. In: Fischer M, Frölich J (eds) Knowledge complexity and innovation systems. Springer, Heidelberg, pp 101–123CrossRefGoogle Scholar
  23. Krugman PR (1991) Geography and trade. Leuven University Press, LeuvenGoogle Scholar
  24. Lösch A (1954) The economics of location. Yale University Press, New Haven, CTGoogle Scholar
  25. Lucas R Jr (1988) On the mechanisms of economic development. J Monetary Econ 22:3–42CrossRefGoogle Scholar
  26. Lundvall B-Å (ed) (1995) National systems of innovation – towards a theory of innovation and interactive learning. Biddles, LondonGoogle Scholar
  27. Marshall A (1920) Principles of economics, 8th edn. Macmillan, LondonGoogle Scholar
  28. Myrdal G (1957) Economic theory and underdeveloped regions. Duckworth, LondonGoogle Scholar
  29. Nelson RR, Winter S (1982) An evolutionary theory of economic change. Harvard University Press, Cambridge, MAGoogle Scholar
  30. Palander T (1935) Beiträge zur standorttheorie. Almqvist & Wicksell, UppsalaGoogle Scholar
  31. Rogers EM (1983) Diffusion of innovations, 3rd edn. The Free Press, New YorkGoogle Scholar
  32. Romer P (1986) Increasing returns and long run growth. J Polit Econ 94:1002–1037CrossRefGoogle Scholar
  33. Romer P (1990) Endogenous technological change. J Polit Econ 98:71–102CrossRefGoogle Scholar

Copyright information

© Springer-Verlag Berlin Heidelberg 2014

Authors and Affiliations

  1. 1.Jönköping International Business SchoolJönköping UniversityJönköpingSweden
  2. 2.Economics and InformaticsUniversity WestTrollhättanSweden

Personalised recommendations