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Knowledge spillover is an exchange of ideas among individuals. In knowledge management economics, a knowledge spillover is a non-rival knowledge market externality that has a spillover effect of stimulating technological improvements in a neighbor through one's own innovation. A knowledge spillover is an internal knowledge spillover if there is a positive impact of knowledge between individuals within an organization that produces goods and/or services. A knowledge spillover is an external knowledge spillover if there is a positive impact of knowledge between individuals without or outside of a production organization. MAR spillovers, Porter spillovers and Jacobs spillovers are three types of spillovers.

MAR spillover

Under the MAR spillover view, the proximity of firms in the same, common industry to each other affects how well knowledge travels among firms to facilitate innovation and growth. The closer to the firms are to one another, the greater the MAR spillover. The exchange of ideas largely is from employee to employee in that employees from different firms in an industry exchange ideas about new products and new ways to produce goods. The opportunity to exchange ideas that lead to key innovations where employees in a common industry in a given location are stationed close to one another. Business parks are an example of concentrated businesses that may benefit from MAR spillover. Many semiconductor firms intentionally located their research and development facilities in Silicon Valleymarker to take advantage of MAR spillover. In addition, the film industry in Los Angeles, Californiamarker and elsewhere relies on a geographic concentration of specialists (directors, producer, scriptwriter, and set designers) to bring together narrow aspects of movie-making into a final movie product.

MAR spillover has its origins in 1890, where the influential Englishmarker economist Alfred Marshall developed a theory of knowledge spillovers. Knowledge spillovers later were extended by economists Kenneth Arrow(1962) and Paul Romer(1986). In 1992, Edward Glaeser, Hedi Kallal, Jose Scheinkman, and Andrei Shleifer pulled together the Marshall-Arrow-Romer views on knowledge spillovers and named the view MAR spillover in 1992.

Porter spillover

Porter (1990), like MAR, argues that knowledge spillovers in specialized, geographically concentrated industries stimulate growth. He insists, however, that local competition, as opposed to local monopoly, fosters the pursuit and rapid adoption of innovation. He gives examples of Italian ceramics and gold jewelry industries, in which hundreds of firms are located together and fiercely compete to innovate since the alternative to innovation is demise. Porter's externalities are maximized in cities with geographically specialized, competitive industries.

Jacobs spillover

Under the Jacobs spillover view, the proximity of firms in different, diverse industry to each other affects how well knowledge travels among firms to facilitate innovation and growth. This is in contrast to MAR spillovers, which focus on firms in a common industry. The diverse proximity of a Jacobs spillover brings together ideas among individuals with different perspectives to encourages an exchange of ideas and foster innovation in an industrially diverse urban environment. Developed in 1969 by economist Jane Jacobs, both Jane Jacobs and economist noted that Detroitmarker’s shipbuilding industry from the 1830s was the critical antecedent leading to the 1890s development of the auto industry in Detroit since the ship gasoline engine firms easily transitioned into building gasoline engines for automobiles.


  1. Carlino, Gerald A. (2001) Business Review Knowledge Spillovers: Cities' Role in the New Economy. Q4 2001.
  2. Jaffe, Adam B.; Trajtenberg, Manuel; Fogarty, Michael S. (May, 2000) The American Economic Review Knowledge Spillovers and Patent Citations:Evidence from a Survey of Inventors. Vol. 90, No. 2, Papers and Proceedings of the One Hundred Twelfth Annual Meeting of the American Economic Association, pp. 215-218.
  3. Glaeser et al., "Growth in Cities", Journal of Political Economy, 1992 Vol. 100, No. 6

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