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Knowledge externalities and the financing of innovation

In: Elgar Encyclopedia on the Economics of Knowledge and Innovation

Author

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  • Mehmet Ugur

Abstract

This entry first outlines the journey through which knowledge production (invention) has become an essential area of research in economics. Then it evaluates the research findings on how or whether public policy can ensure optimal resource allocation for knowledge production in a market economy. It concludes by suggesting that there is a welfare case for government support to innovation research in a market economy, but the achievement of optimal outcomes is not guaranteed with respect to resource allocation and/or research outcomes. The probability of suboptimal outcomes increases with information asymmetry, risk aversion and market power.

Suggested Citation

  • Mehmet Ugur, 2022. "Knowledge externalities and the financing of innovation," Chapters, in: Cristiano Antonelli (ed.), Elgar Encyclopedia on the Economics of Knowledge and Innovation, chapter 37, pages 302-309, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:19760_37
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