Localized knowledge percolation processes and information networks

The development of knowledge within industries is strongly influenced by the network structure of relations among firms. Firms relying on localized knowledge can implement their technological capability not only by means of research and development expenditures and internal learning but also through the systematic absorption of technological and scientific externalities available in their environment. Percolation processes have been studied in physics as the outcome of two classes of forces termed as connectivity and receptivity. The former measures the number of connections in place among the agents in the network and the latter the capability of each agent to absorb the informations received. This paper applies the methodology of percolation processes to operationalize the implications for both the economics of innovation and for technology policy of the structural characteristics of innovation networks as communication systems.