Localized technological knowledge: pecuniary knowledge externalities and appropriability

Recent advances in the economics of knowledge highlight the key role of pecuniary knowledge externalities in explaining the system dynamics of total factor productivity growth. When non-exhaustible technological knowledge is an input both in the production of new goods and of further knowledge, and the acquisition of external knowledge, as a non-disposable input in the production of new knowledge, is not free, pecuniary externalities, as opposed to technological externalities, provide an important clue to understanding the key role of knowledge governance mechanisms in assessing the rate of growth of total factor productivity and economic systems at large. The negative effects upon appropriability limit the advantages of agglomeration.