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January 2013, Volume 23, Issue 1, pp 77–96 | Cite as

Complexity and technological change: knowledge interactions and firm level total factor productivity

Regular Article


The analysis of social interactions as drivers of economic dynamics represents a growing field within the economics of complexity. Social interactions are a specific form of interdependence whereby the changes in the behavior of other agents affect utility functions for households and production functions for producers. In this paper, we apply the general concept of social interactions to the area of the economics of innovation and we articulate the view that knowledge interactions play a central role in the generation of new technological knowledge so that innovation becomes the emergent property of a system, rather than the product of individual actions. In particular, we articulate and test the hypothesis that different layers of knowledge interactions play a crucial role in determining the rate of technological change that each firm is able to introduce. The paper presents an empirical analysis of firm level total factor productivity (TFP) for a sample of 7,020 Italian manufacturing companies observed during the years 1996–2005. This will enable us to identify the distinctive role of regional, inter-industrial and localized intra-industrial knowledge interactions as distinctive and significant determinants, together with internal research and innovation efforts, of changes in firm level TFP.


External knowledge Social interactions Complexity Total factor productivity


O31 O33 L22



The authors acknowledge the financial support of the European Union D.G. Research with the Grant number 266959 to the research project ‘Policy Incentives for the Creation of Knowledge: Methods and Evidence’ (PICK-ME), within the context Cooperation Program / Theme 8 / Socio-economic Sciences and Humanities (SSH) in progress at the Collegio Carlo Alberto and the University of Torino, and the research assistance provided by Federico Caviggioli. Giuseppe Scellato acknowledges the funding of the Politecnico di Torino. Both authors acknowledge the comments of two anonymous referees and of the editor.



Robustness control

Selected model specifications estimated with heteroskedasticity robust standard errors clustered at the industry level (models I and II) and at the regional level (models III and IV)

Significant at the: *95 %; **99 % level


Description of variables and summary statistics






Antonelli, C. & Scellato, G. J Evol Econ (2013) 23: 77. https://doi.org/10.1007/s00191-012-0299-8



