A Model of the Learning Process with Local Knowledge Externalities Illustrated with an Integrated Graphical Framework

We present a unified graphical framework accounting for the nature and impact of spillover effects. The dynamics of the learning process with a specific spillover transfer mechanism can be illustrated by recurring to this four-quadrant picture. In particular, a whole cycle of technological learning is explained with help of such a graphical representation of the basic learning process in the presence of knowledge spillovers. We hypothesize two different functional specifications of spillover exchanges among firms within a local innovation system. Each conceivable shape for the knowledge transfer relationship among firms expresses a possible mode and intensity of information processing arising from technology spillovers. A general proposition regarding the relative efficiency of the two alternative formal models with spillovers effects is derived. The basic models with spillover effects are then extended in several relevant directions.