Knowledge and Rivalry

If Laurel develops a new method to get rid of headaches, let us call it NoheadachesA, he will be able to use it and to get a direct benefit. If Hardy, a generic member of the public, buys, rents, imitates, or steals the new method, Laurel will not lose its control; he will continue to be able to use NoheadachesA. Two people will benefit from the same method and this will double the social advantages provided by the new knowledge. While the transfer of a physical commodity (a pen, a car, a machine) implies that the original proprietor loses control of the object, nothing like that happens when knowledge is acquired by or transferred to others. In this sense, knowledge is non-rivalrous in consumption.

If Laurel has invested massively to develop NoheadachesA, he might be willing to sell or license the knowledge rather than disseminate it for free. Laurel might be eager to find a market for his knowledge, especially since the sale will not imply that he will forget about it, and he can continue to use it. As with mass production, there are no limits to duplications, but variable costs are zero or very low. Even if Laurel sells the exclusive right of NoheadachesA to a client, he might continue to use the knowledge acquired to generate new one. If Hardy acquires the license for NoheadachesA for a limited period, at the end of the lease he will still possess it and it will be difficult to prevent him from using it again.

Both buyers and sellers of knowledge have to face a market that is highly imperfect.² Hardy might not be willing to pay a price for knowledge that he has not yet seen in operation (we do not often buy an item unless we have a degree of certainty that it will serve our purposes). But if Laurel discloses his knowledge to Hardy, up to the point that he can be sure that it serves his purposes, he will not need to pay a price for something that he already knows.

If another inventor, Bernard, also develops a competing device, a fierce competitive race may occur between Laurel and Bernard since both of them potentially aim to sell the product to the same consumers. Laurel and Bernard will compete for market shares and this will imply their attempts both to upgrade the knowledge to make it more appealing to prospective customers and to protect it according to the available systems. This process has all the characteristics of economic rivalry. Although there is no rivalry in consumption, there might be a substantial rivalry in the generation and upgrade of knowledge.

Knowledge and Excludability

The motivations that induce individuals to generate new knowledge are diverse. Some may be willing to invent for their own personal pleasure, and may not necessarily be looking for material rewards. For a large part of the academic community, fame and reputation are already sufficient rewards for their commitment. For this community, the diffusion of research results is a priority, and it is up to that community itself to undertake active policies, including science communication, to reduce the number of those excluded from access.

But if prospective gains induce Laurel to devote time, energy, and resources to generate new knowledge, he will try to do his best to profit from it. Therefore, although Laurel does not lose the control over his knowledge when Hardy is using it, he will not look for its personal use only but will look to commercialize and to profit from it. In order to get some form of remuneration, Laurel will search for methods to exclude individuals who do not pay a price to use the method (excludability). If Laurel succeeds in doing that, the knowledge generated is still non-rivalrous in consumption but it will become excludable, or accessible to members that have been granted access, that is, it will become a network or a club good.

Since knowledge is non-rivalrous in consumption, excludability needs to be artificially constructed. There are several methods that inventors and innovators can use to exclude others from the benefits of knowledge they generated:

• Secrecy. Keeping a discovery secret allows the inventor to prevent others using it without charge. The practice is rather diffused not only in the military sector but also in business companies. Secrecy offers only partial protection since it can be broken: military and industrial espionage, headhunting, reverse engineering, and other practices do not guarantee that the original inventor retains the secret. And, in parallel, the strategy of secrecy may hamper the marketing and commercial diffusion of an innovation.
• Access codes. Developing technical methods such as access codes, passwords, and software protection makes it more difficult to use the knowledge without authorization. Access codes are the paradox of the digital society. On the one hand, the technical reproducibility of artifacts increases the non-rival part of knowledge. On the other hand, the creation of devices such as access codes can prevent open access (see Hess and Ostrom 2007). But access codes, passwords, and other devices do not guarantee absolute protection, as hackers and their victims well know.
• Intellectual property rights (IPRs). The two economic methods above are complemented by IPRs, a family of legal devices (patents, copyrights, trademarks) that should guarantee the inventors and the innovators the exclusive right over the product of their activities, although for a limited span of time. These tools are an institutional solution provided by the government in the hope of solving the problem of underproduction of public goods. The rationale in setting IPRs is the comparison of static versus dynamic advantages: in the short run, there is a loss of welfare associated with the fact that the dissemination of knowledge is constrained, but in the long run they may induce profit-seeking agents to invest in knowledge and/or to make it public rather than keep it secret. Even more than in other areas of economic life, institutions are needed to enforce the excludable nature of knowledge. Also IPRs are often infringed and they do not manage to guarantee full protection.

Companies generally use a combination of the three methods, integrating industrial secrecy, codes, and other technical devices and IPRs. The economic literature on technological appropriability (Levin et al. Levin, Klevorick, Nelson and Winter, 1987; Cohen, Nelson, and Walsh 2000; Arundel 2001; Odagiri et al. Odagiri, Goto, Sunami and Nelson, 2010) has shown that each technical field, industry, company, and country has specific ways to appropriate its knowledge using different excludability devices. If industrial secrecy cannot be guaranteed because the knowledge is visible and easy to imitate, inventors and innovators may devote a considerable amount of the resources to produce devices which will obstruct others from using the knowledge without permission. Software companies invest substantial resources not only to improve software, but also to prevent its unauthorized duplication.

Not all fields can be equally protected, and profit-seeking inventors will take that into account before devoting time and energy in one field rather than another. If we assume that some knowledge is more likely to be made excludable and it is easier for their inventors to generate profits, excludability may steer agents to work in an area rather than in another. If appropriability is not possible, there is the danger of a “tragedy of knowledge” similar to the tragedy of commons (Harding 1968), since the economic incentive to generate knowledge will be reduced. Since institutions have an impact, for example, making IPR protection weaker or stronger, excludability raises an important policy issue: What is the suitable level of excludability that governments should guarantee to inventors and innovators? The more institutional devices that contribute to make knowledge excludable the less it will have the characteristic of a pure public good.

Knowledge Is Not Freely Available

The sections above have looked at the generation of knowledge through the lens of non-rivalry and non-excludability. But the standard framework of public goods, when applied to knowledge, has also some limits. The typical cases of public good, such as defense and clean air, assume that economic agents receiving the “good” do not have to make an additional effort to reap the benefits. If a citizen lives in a well-defended country, or breaths clean air, he or she is not even supposed to notice it. The story is entirely different with knowledge: even when the producers of knowledge have the best intentions of transferring their expertise, the economic agent has to invest his or her time, efforts, and resources to acquire the expertise and to be able to benefit from it. And not even those efforts will guarantee that he or she will in the end manage to acquire and master the expertise. Stiglitz (1999) has argued that

Knowledge of a mathematical theorem clearly satisfies both [non-rivalry and non-excludability]: if I teach you the theorem, I continue to enjoy the knowledge of the theorem at the same time that you do. By the same token, once I publish the theorem, anyone can enjoy the theorem. No one can be excluded.

This statement does not take into account the costs and efforts needed to learn and to exploit the economic benefits of the theorem. To be sure, Stiglitz is not silent about the costs of acquiring and using knowledge but they are conceived basically in terms of transaction costs associated with the transmission of knowledge. However, he argues that this does not affect the public good nature of knowledge, since private owners will simply charge a fee reflecting the marginal cost of transmission. So overall the problem of transferring knowledge is largely underplayed.

The art of playing the violin is well codified in hundreds of books, scores, records, and videos, and all this wealth of information is publicly available at zero or very low costs. But only a few of those who make an attempt manage to become professional violin-players. Companies selling mobile phones or cameras do their best to transfer the knowledge on how to use these products to their clients up to the point that they invest resources to hire writers, designers, and cognitive psychologists to make instructions easily understandable. But only a few customers devote enough time and energy to use these appliances at their best. To play the violin decently and to use a mobile phone properly both requires that the would-be imitator devote time and resources to learning. This is even more evident in the case of technical knowledge in which the recipient needs to have basic knowledge to scan, understand, and use it. Economic development studies have convincingly shown that North–South technology transfer is unlikely to be successful unless the recipients of knowledge invest time and resources to absorb it (Bell and Pavitt 1997; Athreye and Kapur in this volume, Chapter 9). Technology transfer, like the generation of new knowledge, is an uncertain activity with successes and failures.

This is why it is wrong to equate knowledge and, above all, its technological component, to information (Pavitt 1987). Most knowledge, and certainly scientific and technological knowledge, is not available without costs since those willing to learn should make their own efforts. There are a few cases in which the benefit of knowledge is fully incorporated into products and it does not require an active role of users: for example, to benefit from a new drug it is sufficient to swallow the pill. These cases can be labeled turnkey knowledge. But turnkey cases are rather exceptional.

Callon (1994) has introduced the difference between knowledge and technology that is freely available (not protected by legal or technical devices) and knowledge and technology that can be used without incurring costs (i.e., can be directly applied without additional investment by the prospective user). Freely available knowledge is a rather large basin: all knowledge in textbooks and in the scientific literature is freely available. Also technology that in its origin is proprietary is often freely available: patents, for example, have a legal validity of not more than 20 years, and the majority of them lapse earlier than that since companies do not even bother to pay their renewal fees (Hikkerova, Kammoun, and Lantz 2013). But this does not mean that everybody can have a direct benefit from them. In order to exploit this basin of knowledge, a lot of additional effort in learning, tooling up, and development is needed. In this sense, the amount of knowledge that can be used without incurring costs seems to be very limited. As we have seen, not even the knowledge embodied in some products, such as computers, cameras, mobile phones, can be used without incurring costs, since the effort undertaken by consumers could considerably change the way in which they manage to exploit the products.

The economics of innovation has also shown that there are huge inter-industry differences. There are areas in which the transfer of knowledge is easier, and the infrastructures needed by would-be imitators are rather basic. In other areas it is the opposite. Drugs can be imitated and replicated rather easily while in nuclear physics entry barriers are much stronger, and only a few organizations are able to manufacture a nuclear reactor. There are very significant differences across typologies of knowledge, products, and industries. According to the product and the industry, excludability can change considerably. This recalls a basic fact, namely that knowledge is a highly heterogeneous commodity and in many cases it is not a commodity at all.

Summing up, knowledge has some characteristics only of a public good especially since it is non-rivalrous in consumption. There are economic and institutional methods that would potentially allow making knowledge excludable, but they are never totally effective. Knowledge is very close to being a pure public good when it can be used turnkey, namely when it is not required for users to properly understand how it works and how it is developed. There are, no doubt, cases of turnkey knowledge, but they are not very frequent. In most cases, users have to learn to use knowledge, and the more it is sophisticated and complex, the more it will require investment of time and resources. In these cases, even when knowledge is free to use, it can be used only if the relative costs are affordable. Therefore, what makes knowledge different from public goods is not the related production process, rather its process of diffusion, which has been scarcely addressed in standard economic theory.

In-House Investment

The government develops the knowledge through publicly funded institutions such as research centers (e.g., NASA or the Max Planck Institutes) and universities. This includes the training of qualified people under the assumption that they will become a knowledgeable and technically competent class. In principle, the results of government-funded research should be in the public domain and freely available.

Procurement

The government, through its ministries and agencies, contracts to the business sector the development of the knowledge needed for its purposes (as it is often the case with military, space, and health programs). Procurement can be in the form of knowledge embodied in final products or entirely disembodied. In the first case, the government purchases products (e.g., an aircraft with given specifications) and the executing firm is required to develop the necessary knowledge. In the second case, the government can directly ask the business sector to develop new disembodied knowledge (for example, the prototype of a new vaccine). In the case of procurement, the government generally holds the IPRs, although contracting firms are likely to retain them de facto. Since the government holds the property rights, it may also distribute the knowledge to other fields and to other companies (as is often the case of procurement associated with defense and space programs). In both cases, since the contracting firm develops the knowledge, it will retain the expertise. Even if contracts require the contracting firm to erase all associated information, it will not be possible to erase the knowledge acquired.

Beauty Contests

The government rewards the individuals and the organizations that have produced socially relevant knowledge through “prizes.” These prizes should be an incentive for individuals and companies to carry out scientific and technological investigation. The contest implies that private players disclose their knowledge, and the government can acquire it as a consequence of delivering the prize. But this is more likely to be effective for codifiable rather than tacit knowledge.³

Intellectual Property Rights (IPRs)

Finally, the government guarantees private inventors the fruits of their discoveries, and IPRs are the main way this is ensured. They provide an incentive to private agents to invest in the generation of knowledge and to disclose the knowledge developed. By making knowledge property, IPRs are designed to make it temporarily excludable and generate a market for it. As we have seen, the effectiveness of IPRs changes not only according to the institutional design in each country (Odagiri et al. 2010), but also according to the invention, the product, and the industry (Levin et al. 1987; Cohen et al. 2000; Arundel 2001).

In contemporary capitalist economies governments use all four methods, using excludability differently. In the first three cases, government intervention is designed to minimize excludability and often the interventions are combined with deliberate policies to promote the diffusion of knowledge. In the case of IPRs, on the contrary, the government guarantees excludability, although for a limited period of time. The basic rationale to explain the difference is that public sources generally finance in-house investment, while profit-seeking agents invest in the knowledge generation that IPRs should reward.

It is often stated that public intervention in the market for knowledge is the result of “market imperfections.” However, this should not induce us to believe that, once upon a time, there was a market for knowledge, and that at a later stage governments intervened to regulate the imperfections. Historically, direct forms of government intervention have existed long before the creation of a formal market for knowledge. The first introduction of the modern patent system, the milestone for IPRs, was introduced in the Venetian Republic in 1474 (May 2002), while public investment in knowledge and education started a few thousand years ago.

Public Institutions

Members of national academic communities and of other publicly funded institutions always had a strong propensity to exchange their wisdom, insights, and perceptions with foreign colleagues. Some of the instruments used to guarantee the international dissemination of ideas included academic societies, international journals, conferences, sabbatical years, and mobility grants. National governments have encouraged the academic community to be open to cross-border collaborations, probably because there is awareness that the outcomes are non-rivalrous and therefore they should also be made non-excludable, within borders as well as across borders. Moreover, there is a clear self-interest: collaboration implies not only knowledge outflows, but also inflows.

Citizens may potentially benefit from knowledge that has been generated elsewhere, and often paid by taxpayers of other countries. The propensity to act as a free rider, however, is constrained by the characteristics of knowledge: on the one hand, countries that do not invest enough have lower absorptive capacity and may be slower or inefficient in putting into practice what has been generated elsewhere. On the other hand, countries which invest more in knowledge are also those able to learn and assimilate the knowledge generated elsewhere. Countries manage to capitalize what they pay for.

The transfer of scientific and technological expertise to catching-up countries is constrained by the level of capabilities of the absorbing countries. This is a typical case where the difference between freely available knowledge and knowledge that can be used without incurring costs becomes relevant (Callon 1994). Even if significant portions of knowledge are freely available, this does not mean that other countries are able to collect the benefit without the necessary infrastructures and skills. The countries that have managed to absorb knowledge generated are also those that have invested massively in endogenous infrastructures, R&D, and education. Japan in the 1950s and 1960s, South Korea and Taiwan in the 1970s and 1980s, China in the 2000s are all cases of countries that have taken advantage of knowledge generated elsewhere because they have made an enormous endogenous effort to acquire it. To consider knowledge as a pure public good (Stiglitz 1999) risks diffusing the view that developing countries could benefit from the competences of developed countries if the latter are prepared to remove barriers to the transfer. But this is inaccurate since institutional (such as IPRs) or economic (such as industrial secrecy) barriers are not the main obstacles to the use of knowledge. The main obstacle faced by developing countries is the lack of endogenous absorptive capabilities.

The global public goods framework suggests also another important dimension: it is in the interest of all countries, including those that are already active in the generation of knowledge, to augment the partners involved in scientific and technological activities since this will enlarge the overall stock of knowledge. There is a potential mutual incentive for developed and developing countries to carry out and exchange non-proprietary knowledge. Public players have, in fact, pursued active policies to induce other countries to increase the pool of knowledge. Funded joint research programs, international conferences, international disciplinary academic associations, sabbatical years, and student exchanges are also methods to foster emerging and developing countries in the knowledge society. In these areas, governments are likely to have a healthy agonistic spirit similar to that encountered in the Olympic Games: each country is fostering its own academic community in order to acquire a better performance, but the methods and results are generally shared.

One way to gather empirical evidence on this form of cross-border collaboration is by looking at the scientific papers that are co-authored by scientists of different countries (see Hennemann and Liefner in this volume, Chapter 16),⁷ an indicator of mutual collaboration in the generation of new knowledge without a hierarchy among participants. International science and engineering co-authored papers have substantially increased, thanks to the Internet and ICT. Internationally co-authored papers have grown from 16% of the total in 1997 to 25% in 2012 (National Science Foundation 2014: ch. 5). Already one fourth of academic papers are the outcome of direct cross-border collaboration. This form of collaboration has affected all countries, but it has become more and more important in small countries. Regions of the world with lower scientific capabilities are, in proportion, relying more on cross-border collaborations (National Science Foundation 2014: Appendix, Table 5-41).

The Business Sector

The business sector is increasing its role in the development of knowledge not only within borders, but also internationally. Companies contribute to perform R&D, to upgrade skills, to disseminate technical and engineering capacities at home and abroad. Firms can less and less be associated with a national territory. The activities they carry out outside their nation, including R&D, have increased substantially (see Ietto-Gillies in this volume, Chapter 6). Several leading multinational companies (MNCs) have built their own intra-firm and inter-national innovation centers. New products introduced by firms are traded in the international markets, new processes are scrutinized and diffused by competitors at home and abroad, and ultimately the externalities associated with companies’ knowledge generation are less and less restricted to a specific nation. It might be discussed to what extent the knowledge generated by MNCs is private or public, but their investment in R&D and innovation is by definition multinational rather than national, and it generates substantial externalities across national borders.

MNCs are important vehicles for the international spread of knowledge. They do not necessarily manage to keep their ownership of knowledge, and very often they act as fertilizers for skills that are picked up and further developed in host countries. A significant case is represented by the software district of Bangalore: from an original foreign direct investment by Texas Instruments in the mid 1980s, a hub of excellence in ICTs and software has been developed, thanks also to education policies that have managed to train computer engineers at local universities (Chaminade and Vang 2008). This led to the birth and growth of a cluster of dynamic local firms, which has further induced other MNCs to invest in the place. A deliberate policy to build competences has successfully upgraded technological capabilities.

In recent years, firms have become more willing to collaborate with other firms to develop their technological knowledge. A vast literature has started to collect evidence and data on inter-firm technology agreements, defined as something more than an occasional collaboration, involving two or more independent firms and where the generation and application of knowledge is a key component (see Narula and Martínez-Noya in this volume, Chapter 7). Why do firms share a key competitive resource such as technological capability with their rivals? It has emerged that the need to share costs and risks with others is often a more important factor than the need to keep research projects confidential. The implication is that even profit-seeking agents are partially abandoning the search for exclusivity on their knowledge and are prepared to share it with actual or potential rivals.

International Organizations

International organizations play an important role in generating and disseminating knowledge. Since inter-governmental organizations are established by states to address common problems, it seems natural that they are also in charge of the improvement of general-purpose knowledge. Can international organizations be the genuine providers of knowledge as a global public good?

First, international organizations set common standards that allow all countries to benefit from best-practice knowledge. Transport and ICTs can operate internationally only if there are joint standards. The value of the standards increases with the number of players able to use them: by definition, a telephone that does not allow communication with anybody has no value. Producers have an incentive to transfer the relevant knowledge and expertise to the largest number of potential users. International organizations devoted to establish, disseminate, and upgrade standards therefore do play an important role in the transmission of knowledge and technical competence. Standards themselves have many of the attributes of pure public goods. While the implementation of standards may seem to be just a “passive” acquisition of knowledge, often they require also the making of endogenous competences in the countries that join the standards, then enabling also “active” knowledge developments.

Second, international organizations are also in charge of the transmission of scientific and technological expertise. Specialized agencies such as FAO, UNICEF, UNIDO, WHO, and the World Bank do play a crucial role in allowing countries to acquire competencies. This does not happen in development projects only. When international organizations allow people from different countries to sit together, they provide an important learning opportunity. The role of international organizations should also be stressed to counterbalance the typical and dominant direction of technology transfer, which traditionally implies the transfer of knowledge from the North to the South. In some occasions, the knowledge transferred may not necessarily be the most appropriate for the needs of the South. International organizations provide the opportunity to exchange also South–South knowledge. In many cases, knowledge developed in some countries of the South is more effective for other countries in the South than what has been cultivated for different purposes in the North, empowering what has been labeled “reverse innovation” (Govindarajan and Trimble 2012).⁸

Third, there are also a few research centers promoted and funded under the auspices of international organizations where innovation and learning work as two sides of the same coin. In fields with high fixed costs, governments have promoted joint research centers, as in the case of CERN. The European Union has established several international centers in high-cost and high-risk scientific domains, under the assumption that the outcomes will equally benefit all member countries. Other research centers have been established by the United Nations University or under the auspices of UN specialized agencies (as in the case of the UNIDO International Centre for Science and High Technology). These are pioneering cases of a genuine transnational public financing of public goods. The research centers and learning institutions are just a few if compared with the total resources provided to the national ones. Still, they provide significant models that point to a new way to promote knowledge for development.

If there is the genuine political interest of making knowledge a pure global public good in some areas, it might be wondered why the financing of cooperative international research is not larger, while the bulk of government spending for R&D is still directed toward national institutions. There are many reasons that can explain why. First, governments are well aware that R&D generates a lot of externalities, and that the local dimension is equally important. Second, government R&D spending often occurs in an area of inter-state rivalry, either because it is associated with national power (as in the case of military programs) or because it is devoted to supporting the competitiveness of national firms. But if there is the political willingness to disseminate the benefits of knowledge, transnational and collaborative R&D centers seem to be the appropriate instrument.

The Tendency Toward Privatization of Knowledge Commons

The public sector has various methods to achieve the proper generation and dissemination of knowledge. The first is to promote, finance, and perform work in scientific and technological institutions. Such a portion of knowledge is generated through public money and is in the position to be fully disseminated in the social and economic fabric. The second is to guarantee sufficient incentives to profit-seeking agents willing to invest in knowledge, providing the institutional context that would allow them to profit from it. IPRs and other institutional devices are precisely designed to provide these incentives by making knowledge excludable and tradable. We have noted that there is an intrinsic tension in government’s behavior: on the one hand, it uses public resources to promote knowledge because it has the characteristics of a pure public good, on the other hand, it provides norms such as those of the IPRs that allow the business sector and, more and more, also the public sector,¹² to privatize the knowledge generated.

Governments should make an attempt to manage this tension between the proprietary and the public components of knowledge. Any actions aiming at reinforcing IPRs should be matched with policies devoted to foster the public dissemination of knowledge. If IPRs are strengthened, the public space for knowledge dissemination should be compensated through other policies such as: (a) expanding government-performed R&D to generate a pool of public knowledge to which both public and business players could draw; (b) financing of pre-competitive and cooperative research in the business sector to increase flows; (c) rewarding profit-seeking inventors and innovators that are prepared to disseminate the results they have achieved through open source strategies.

Unfortunately, in the last three decades, we have seen the adoption of dangerous strategies to privatize knowledge. On the hand, we have witnessed a substantial reinforcement of IPRs, enlarging the scope of the Western system also to developing countries and privatizing knowledge that was previously public (Maskus and Reichman 2004). On the other hand, the public sector has also reduced its commitment to the promotion of knowledge. For example, the share of R&D of the business sector has substantially grown in most advanced countries while the share of government-funded R&D has declined correspondingly. Table 23.2 reports some data for four of the largest R&D spending nations: Germany, Japan, the United Kingdom, and the United States. From 1981 to 2011 the share of R&D financed by the government has been reduced in all countries. The dominant R&D spender is now the business sector. Where the government still finances a substantial share of R&D, as in the case of the United Kingdom and the United States, a growing portion is performed in the business sector: in the United Kingdom, the business sector finances 48.9% of the national R&D but it performs as much as 63.6%. Similarly, in the United States the business sector finances 58.6% of the national R&D but it performs 68.5%. The difference is associated mostly with public contracts provided to companies.

Finally, there has even been an attempt to allow private profits from R&D funded by the government and performed in the public sector. We have already highlighted the tendency to make such knowledge proprietary allowing the executing players (including universities, public research centers, and companies) to use IPRs and therefore to appropriate privately what has been funded by taxpayers.

If knowledge should really be sustained as a global public good, the first step is to reverse the privatizing trend that has dominated over the last 30 years.

Absorptive Capability for Disseminating Knowledge Across Countries, Particularly in Developing Countries

Although knowledge can be assimilated to a public good in the production phase, we have strongly argued that the successful diffusion and use of knowledge requires that recipient agents invest time and resources in learning and applying it. The distinction between production and diffusion is already relevant at the country level, but we can still assume that, within the borders of an individual country, the capabilities and the institutions generating knowledge manage to distribute it to users. At the global level, the transmission of knowledge between producers and users is much less likely to be automatic since there is less proximity. In particular, in the absence of absorptive capability by the recipient country, the availability of knowledge is of no use.

This has major implications for an international technology transfer strategy. To build absorptive capacity requires time, effort, and investment: infrastructures, education, training, and even R&D labs are needed to grasp, learn, and take advantage of the existing stock of knowledge. To focus on the supply from developed countries without taking into account the absorptive capacity of developing countries could lead to a waste of resources. It is a waste of time to bring the horse to the water if nobody has taught to the horse how to drink.

For this reason, the notion that knowledge is be a public good (as argued by Arrow 1962 and Stiglitz 1999), which we claimed to be theoretically inaccurate, is also politically harmful since it may diffuse the view that would-be users could reap its advantages freely. We maintain, on the contrary, that individuals, companies, and countries do not manage to take advantage of knowledge developed elsewhere unless they also make a substantial investment to effectively absorb it. When we consider the global public dimension of knowledge, the diffusion problem should be addressed, to guarantee that individuals or countries which should benefit from it have the necessary capabilities to absorb it. In brief, public intervention is required not only to make global knowledge producible, but also absorbable.

The Importance of International Collaboration

Since knowledge is non-rival in consumption, the larger the pool of resources devoted to it the more positive externalities will be generated. There is a direct interest of national governments to exchange results and to foster scientific and technological institutions in countries where they are weak. An effective global governance of knowledge, based on cooperation among governments and across national academic institutions, is therefore desirable. This, in turn, requires an increased coordination among national efforts, but also an enhanced role for international organizations dedicated to knowledge generation and dissemination.

The current distribution of scientific and technological capabilities affects the priorities of scientific and technological investigation. Capabilities are strongly concentrated in one part of the world only, the North. Not surprisingly, the public expenditure and other government interventions for the advancement of knowledge are generally directed toward the problems of the North rather than those of humanity. As illustrated in the case of vaccine research, companies in developed countries do not have enough incentives to address these priorities when the potential market is uncertain and IPRs do not guarantee the appropriation of possible returns. Companies and public institutions in developing countries may lack the required capabilities, at least in the short term. As a result, neither the public nor the business expenditure is successfully addressing some of the most important world human necessities.

In the long term, it is desirable and feasible that countries in the South will expand their research capabilities that will allow them to address their own societal needs by developing the required new knowledge. Some emerging countries, especially in East Asia, are expanding their knowledge-base, although their focus is more on economic development than on human necessities. But there is an urgent need of a policy shift, replicating the North–South forms of cooperation that have led, for example, to the eradication of smallpox.

It was possible to pull resources and competences to eradicate smallpox when scientific targets and societal benefits were clearly identified and aligned. If this example should be replicated, transparent and accountable R&D targets, addressing basic human necessity, must be identified. This in turn will require inclusive governance systems. It is unlikely that more public resources will be steered to knowledge if stakeholders are unable to assess what the resources are going to be used for.

A crucial aspect will be to identify in which fields investment in the generation of knowledge should be directed. Fields considered important by general consensus are those that are mutually advantageous for current and future generations and less likely to be associated with trade rivalry. Astronomy, space, and theoretical physics are already some of the areas where strong international collaboration has emerged, and where permanent institutions have also been established. The public goods framework, however, has also indicated that global health and other basic human needs have, so far, been seriously denied by the research agenda.

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