Knowledge Flows, Knowledge Externalities, and Regional Economic Development

  • Charlie KarlssonEmail author
  • Urban Gråsjö
Living 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, i.e., 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.

Immense 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 flows Knowledge spillovers Knowledge externalities Proximity Innovation Economic development 


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© Springer-Verlag GmbH Germany, part of Springer Nature 2019

Authors and Affiliations

  1. 1.EconomicsJönköping International Business SchoolJönköpingSweden
  2. 2.School of Business, Economics and ITUniversity WestTrollhättanSweden

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