The Knowledge Growth Regime

This introduction presents the analytical framework implemented by the book as the grafting of the tools elaborated by the economics of knowledge and the legacy of Joseph Schumpeter to explore the foundations of the new knowledge economy and the shift away from the corporate growth regime. It frames the innovation process as a creative response based upon the accumulation, generation and exploitation of knowledge and highlights the new structure of advanced economies where knowledge is at the same time the prime input and output. It emphasizes the limits of the new knowledge growth regime, raised by the role of finance, income distribution and intellectual property rights and recommends appropriate economic policies based upon an open technology approach.

This chapter summarizes the main achievements of the economics of knowledge with special attention to the central role of the limited exhaustibility of knowledge and its implications in terms of cumulability and extensibility. It recalls the early economics of knowledge. It explores the generation and exploitation of knowledge with the technology production function and the knowledge generation function. It elaborates the knowledge appropriability trade-off, analyzes the problems of the provision of funds to innovation, and highlights the relationships between knowledge externalities and total factor productivity stressing the new trends toward the capitalization of knowledge as a financial asset.

This chapter elaborates a unifying approach to the determinants of technological change that brings together the frameworks of the Schumpeterian creative response, the induced technological change, the demand pull and the localized technological change. The integrated framework enables to explore the effects of absolute and relative technological congruence on the direction of technological change and to unveil its knowledge and labor intensive and fixed capital saving bias. The correct account of the role of knowledge as both an input and an output enables to understand that the actual direction of technological change at work in the knowledge growth regime is biased toward the use of creative labor that is capitalized as an intangible asset.

This chapter elaborates the notion of Schumpeterian growth regimes highlighting the central role of the systemic mechanisms of governance of the interaction and coordination that characterize the generation, use and exploitation of knowledge as the distinctive economic activity that is at the heart of economic systems. It introduces the distinction between entrepreneurial, corporate and knowledge growth regimes according to the institutional differences in the knowledge governance mechanisms.

The mechanisms of generation and exploitation of the new knowledge growth regime have major implications on income distribution and are likely to trigger a substantial segmentation of labor markets into the markets for skilled and creative labor and the markets for standard labor. In the context of the globalization of product markets factor costs equalization drives, the wages of standard labor toward global averages that are lower than the pre-globalization levels. The knowledge-intensive direction of technological change favors the resilience of the wages of creative workers. In the corporate growth regime, unions were able favor the internal distribution of the large oligopolistic gross margins increasing wages well above the levels of marginal productivity. The taxation of wealth and high income further reduced the income asymmetries. The small size of knowledge-intensive business firms reduces the role of unions. The capitalization of knowledge helps in increasing the levels of rent and wealth inequalities. The middle class is exposed to the twin pressure of the globalization of product markets, the dynamics of factor cost equalization and the knowledge-intensive direction of technological and structural change. The identification of relevant dynamic increasing returns triggered by the limited exhaustibility of knowledge together with the need to contrast the increasing income inequality call for the effort to increase the social inclusion in the generation and exploitation of knowledge.

The identification of the increasing returns triggered by the limited exhaustibility of knowledge and of the central role of the interindustrial knowledge externalities triggered by the dissemination of knowledge across product markets calls for a new knowledge policy aimed at reducing the exclusivity of the intellectual property regime with the introduction of two-layers patents according to the activity of perspective users and new public subsidies based on high levels of additionality.

The conclusions summarize the founding stones of the analytical framework implemented by the book grafting of the tools elaborated by the economics of knowledge and the legacy of Joseph Schumpeter. It synthesizes the main results of the analysis: (i) the new structure of advanced economies, (ii) the shift away from the corporate growth regime, (iii) the emergence and consolidation of the new knowledge growth regime where, (iv) knowledge is at the same time the prime input and output. It emphasizes the limits of the new knowledge growth regime, raised by the role of finance, income inequality and intellectual property rights. It recommends a new knowledge policy based upon an open technology approach that builds upon non-exclusive intellectual property rights and R&D subsidies with strong additionality.