chapter  2
The generation and growth of knowledge in late development
Pages 40

Knowledge has properties of a pure public good, in that it is non-rivalrous and non-excludable due to its low marginal cost of reproduction and dissemination/

distribution. Non-rival means that the possessor of an idea or information is not diminished when others use the idea. Low marginal cost results in nonexcludability which in effect makes it relatively easy for others to have access to new information except when legally constrained by an intellectual property right. The view of knowledge as a public good has been inspired by the work of Arrow (1962). Arrow’s contribution was seminal in the sense that it proposed a new framework to look at issues related to the generation of information. Two aspects stand out. Arrow contended that an incentive scheme is required, but he did not specify which one (Gallini and Scotchmer, 2002). Second, although he pointed out clearly why knowledge exhibits properties of a public good, he did not go into categorizing knowledge and specifying the categories of knowledge in which these features manifest. In other words, while there are instances where already created information can be disseminated at marginal costs, this certainly does not hold good for technological knowledge and information (Zeckhauser, 1996).2 Hence, the perspective of knowledge as a public good which is freely available, for instance in codified information accessible without or at little cost and easily transmitted across space and time, does not represent the reality of firms and countries in carrying out innovation.3 Information fed to an economic entity may have little or no impact on such an entity depending on the absorptive capability of the agent, and as such the assimilation of information will take place differentially defined in large part by the environment as well as the capacity of the receivers.4 Both strands of the literature have several important insights for the study of knowledge and development.