Formal theories of economic growth, including newly popular models of "endogenous" growth, rely on a conception of knowledge as explicit and costlessly transferable. Once created, knowledge can spill easily into the hands of others at zero marginal cost, a process of "spillover" that is the...

In neoclassical theory, knowledge generates increasing returns-and therefore growth-because it is a public good that can be costlessly reused once created. In fact, however, much knowledge in the economy is actually tacit and not easily transmitted-and thus not an obvious source of increasing...