Knowledge Creation, Knowledge Diffusion and Network Structure

Abstract

This paper models knowledge creation and diffusion as processes involving many agents located on a network. Knowledge diffusion takes place when an agent broadcasts his knowledge to the agents to whom he is directly connected. Knowledge creation arises when agents receive new knowledge which is combined with their existing knowledge stocks. Thus both creation and diffusion are network-dependent activities. This paper examines the relationship between network architecture and aggregate knowledge levels. We find that knowledge growth is fastest in a “small world”, that is, when the underlying network structure is relatively cliquish (dense at a local level) yet has short paths. This corresponds to a locally-connected graph which includes a few long-distance connections or shortcuts.