Knowledge Governance: Pecuniary Knowledge Externalities and Total Factor Productivity Growth

Building on the Schumpeterian and the Marshallian legacies, this article elaborates a model of endogenous growth. It provides a systemic explanation for the levels and the rates of total factor productivity growth. The generation of technological knowledge consists in the recombination of existing bits of heterogeneous technological knowledge that is necessarily possessed by a myriad of agents. As such, much technological knowledge is external to each agent and yet an essential input. In this context, knowledge governance mechanisms play a key role in the identification, recollection, and provision of the specific items of necessary technological knowledge, external to each agent. Effective knowledge governance mechanisms engender pecuniary knowledge externalities that take place, mainly at the regional level, when and where existing units of external knowledge can be identified, accessed, unbundled, and used—again—at costs that are below equilibrium ones for the recombinant generation of new technological knowledge.