**2. Knowledge and innovation spillover effects**

Knowledge is a resource, a specific asset capable of generating vast external effects (spillovers), or externalities, expressed in the accumulation of knowledge and the continuous production of new knowledge based on acquired competencies, skills, and experience [11]. On the other hand, "learning" effects are, as a rule, associated with a positive phenomenon that contributes to the enrichment of all spheres of life in society [12]. Knowledge created by one economic entity (whether an individual or an entire organization) will definitely become available to other entities over time [13]. This phenomenon can be described as knowledge transfer and knowledge spillover. For firms with an underdeveloped technological, intellectual base, the knowledge-borrowing process becomes essential for their further development [14]. Knowledge gained from the external environment will not always be able to take root in an internal differently tuned system. Effects that arise from the borrowing of experience can differ in nature and direction. In theory, there are several classifications of external knowledge effects, which are outlined in **Table 1**.

The econometric model measuring the effect of R&D investment on knowledge stock and economic growth was first introduced by [15]. Later, in 1986, [16] proved this relationship, based on the fact that the total relevant activity of other firms influencing innovation of a particular firm can be represented as a weighted sum of R&D investments, with weights proportional to the technological proximity of the firms to the one under consideration. Similar studies in terms of topics addressed can be found in works [17, 18]. Evaluation of patenting activity in neighboring regions of France and its relationship with the level of corporate and university R&D expenditures was dealt with by [19]. The paper [20] measures how the geographical distance between firms affects their participation in the Small Business Innovation Research program that awards grants. Software industry in the USA studied and proved that clustering directly affected innovative outputs and growth [21].

In 2004, [22] explored the effectiveness of various channels of R&D spillover effects at the intra-industry level through a survey of 358 Swiss R&D managers representing 127 different lines of business. This monograph, in particular, considers the following factors: R&D activity, reverse engineering (design capability), publications, patents, technical meetings/discussions, and intra-corporate communications as potential knowledge flow channels, with in-house R&D investments being named as the principal factor contributing to spillovers.

Another group of studies investigates relationships between spillover effects and innovations. Сompared the geographical location of companies that published

**5**

*Knowledge Spillover Effects: Impact of Export Learning Effects on Companies' Innovative…*

Negative: theft of confidential information, trade secrets, causing damage to another enterprise

External: result from the company's interaction with the external

Indirect (monetary): arise from dependence upon strategies and pricing

Spatial: have an impact on agents operating in the same economic space

: occur between firms that have a supplier/seller-consumer relationship (strong diversification of knowledge, concentrated in complementary sectors)

environment

Vertical1

policies

patents and those that cited patents in order to demonstrate the local nature of explicit knowledge spillover [23]. The importance of the impact that tacit knowledge has on innovation, which, unfortunately, is unmeasurable and hard to reach,

*technologies through the supply chain from companies with foreign capital to local, domestic suppliers.*

a. External knowledge effects: transfer of knowledge beyond the intended boundary, defined range of

c. Technological effects arise from the diffusion of technologies, with the only difference being that the diffusion takes place in an uncontrolled fashion, without any payment for technology; knowledge is transformed into one of the production factors; technologies are applied in various sectors of the economy

*They are divided into direct and reverse. Direct ones result from foreign investments when national firms gain access to less expensive or new intermediate resources. Reverse ones constitute effects of the dissemination of state-of-the-art* 

Economists have distinguished two types of knowledge spillover effects that are important in terms of growth and innovation: MAR spillovers and Jacobs spillovers.

In 1980 Alfred Marshall developed knowledge spillover theory that was further finalized by Kenneth Arrow and Paul Romer and named "MAR spillover" after its authors [24]. According to that theory, concentration of firms in one sector (industry) facilitates scientific knowledge transfer between firms encouraging growth

should also be taken into consideration.

*Classification of knowledge spillover effects.*

**2.1 MAR spillovers**

*DOI: http://dx.doi.org/10.5772/intechopen.86255*

Positive: improvement of a product, process, and technology by one company as a result of imitation, borrowing from

Internal: result from information, experience, and knowledge being shared between employees of the same entity or technologies, equipment, staff being shared within divisions

Horizontal: occur between firms in similar stages of the

Direct: knowledge not mediated by market transactions, trade; is translated into improvements in structural elements of

Temporary: have an impact on next generations, e.g., as a result of scientific and technological progress, development of

**VI. Innovation and technological knowledge spillover effects**

**VII. Marshall-Arrow-Romer (MAR), Porter, and Jacobs spillover effects** Key attribute: firms are located close to each other (are geographically concentrated)

individuals, organizations (as opposed to knowledge sharing) b. Innovation effects are derivatives of knowledge externalities

**I. Positive and negative**

**II. Internal and external**

of the same company

production chain

**IV. Direct and indirect**

production (material output)

**V. Temporary and spatial**

alternative energy sources

*Source: developed by the authors.*

*1*

**Table 1.**

**III. Horizontal and vertical**

another company

*Knowledge Spillover Effects: Impact of Export Learning Effects on Companies' Innovative… DOI: http://dx.doi.org/10.5772/intechopen.86255*


*Source: developed by the authors.*

*1 They are divided into direct and reverse. Direct ones result from foreign investments when national firms gain access to less expensive or new intermediate resources. Reverse ones constitute effects of the dissemination of state-of-the-art technologies through the supply chain from companies with foreign capital to local, domestic suppliers.*

#### **Table 1.**

*Current Issues in Knowledge Management*

education) is becoming ever more critical every day [9, 10].

**2. Knowledge and innovation spillover effects**

clustering directly affected innovative outputs and growth [21].

being named as the principal factor contributing to spillovers.

In 2004, [22] explored the effectiveness of various channels of R&D spillover effects at the intra-industry level through a survey of 358 Swiss R&D managers representing 127 different lines of business. This monograph, in particular, considers the following factors: R&D activity, reverse engineering (design capability), publications, patents, technical meetings/discussions, and intra-corporate communications as potential knowledge flow channels, with in-house R&D investments

Another group of studies investigates relationships between spillover effects and innovations. Сompared the geographical location of companies that published

Companies currently tend to reorient their efforts toward applied rather than fundamental research, which makes organizations dependent on the state and academic institutions [4, 5]. A similar situation, although smaller in scale and coverage, is faced by scientific organizations due to the increasing financial and political pressure on them [6, 7]. As a result, the structure of the body of knowledge is undergoing significant changes: despite the increasing number of patent applications and scientific publications, scientific activity results are mostly incremental in nature, the consequences of which are hard to predict [8]. In view of the foregoing, ensuring the flow of scientific knowledge, results, and the process of evaluating and monitoring the transfer and adaptation of accumulated experience to one's own work environment within the "triple spiral" system (various knowledge-sharing institutions, science and

In this chapter, we review the knowledge flow phenomenon and the related learning spillover effects as well as their impact on companies' innovative activities.

Knowledge is a resource, a specific asset capable of generating vast external effects (spillovers), or externalities, expressed in the accumulation of knowledge and the continuous production of new knowledge based on acquired competencies, skills, and experience [11]. On the other hand, "learning" effects are, as a rule, associated with a positive phenomenon that contributes to the enrichment of all spheres of life in society [12]. Knowledge created by one economic entity (whether an individual or an entire organization) will definitely become available to other entities over time [13]. This phenomenon can be described as knowledge transfer and knowledge spillover. For firms with an underdeveloped technological, intellectual base, the knowledge-borrowing process becomes essential for their further development [14]. Knowledge gained from the external environment will not always be able to take root in an internal differently tuned system. Effects that arise from the borrowing of experience can differ in nature and direction. In theory, there are several classifications of external knowledge effects, which are outlined in **Table 1**. The econometric model measuring the effect of R&D investment on knowledge stock and economic growth was first introduced by [15]. Later, in 1986, [16] proved this relationship, based on the fact that the total relevant activity of other firms influencing innovation of a particular firm can be represented as a weighted sum of R&D investments, with weights proportional to the technological proximity of the firms to the one under consideration. Similar studies in terms of topics addressed can be found in works [17, 18]. Evaluation of patenting activity in neighboring regions of France and its relationship with the level of corporate and university R&D expenditures was dealt with by [19]. The paper [20] measures how the geographical distance between firms affects their participation in the Small Business Innovation Research program that awards grants. Software industry in the USA studied and proved that

**4**

*Classification of knowledge spillover effects.*

patents and those that cited patents in order to demonstrate the local nature of explicit knowledge spillover [23]. The importance of the impact that tacit knowledge has on innovation, which, unfortunately, is unmeasurable and hard to reach, should also be taken into consideration.

Economists have distinguished two types of knowledge spillover effects that are important in terms of growth and innovation: MAR spillovers and Jacobs spillovers.

### **2.1 MAR spillovers**

In 1980 Alfred Marshall developed knowledge spillover theory that was further finalized by Kenneth Arrow and Paul Romer and named "MAR spillover" after its authors [24]. According to that theory, concentration of firms in one sector (industry) facilitates scientific knowledge transfer between firms encouraging growth

and innovation. Employees of different companies of the same sector (industry) exchange ideas of new products and processes. That is, the higher the concentration of employees of the same specialization on that territory, the higher the possibility of idea exchange that can further lead to innovative solutions. Frequently the latest data on technological breakthrough and know-how keeps its value for a very short period of time, spreading among the professional community afterward. That is why firms aim to locate their R&D centers close to the sources of such data determining the formation of technological clusters [25].
