The mechanisms of knowledge governance: State owned enterprises and Italian economic growth, 1950–1994

• We investigate the mechanisms of knowledge governance in Italy in the years 1950–1994.
• We analyze empirically the role of knowledge spillovers stemming from Italian state owned enterprises (SOE) in the years 1950–1994.
• The results show that SOE's R&D activities positively influenced country-level TFP growth more than private R&D activities.

We investigate the mechanisms of knowledge governance and show that the actual economic benefits stemming from knowledge externalities depend on the characteristics of (a) the sources of such externalities, (b) the context in which spillovers take place, (c) the potential users of the externalities. In the Italian experience of 1950–1994, state owned enterprises (SOE) have been one of the most effective mechanisms of knowledge governance. Italian SOE were effective sources of knowledge externalities as they imitated the US corporate model of intra-muros R&D laboratories. Research activities carried out by SOE were mainly based in upstream industries, with multiple user-producer interactions with firms active in downstream industries, and aimed at implementing a knowledge base characterized by high levels of generic content and a wide scope of application. These characteristics helped disseminate relevant knowledge externalities that played a positive role on total factor productivity in the second part of the XX century in Italy.