Knowledge diffusion and knowledge transfer revisited: two sides of the medal

Understanding the way in which knowledge is interpersonally transferred and how it diffuses over time is of exceptional importance for the economic performance of a society. Although this insight is not new, the link between knowledge transfer and knowledge diffusion so far has not been picked out as a central theme in the relevant research field but instead it seems that it has been treated as a theme on the fringes yet. This paper mainly argues, first, that the speed of knowledge diffusion as well as the shape of the cumulative knowledge diffusion function is governed in most instances by knowledge transfer mechanisms. Second, these knowledge transfer mechanisms differ within and between heterophilic groups who participate in the knowledge transfer process. By perfectly disentangling between and within knowledge transfer mechanisms, the paper in general tries to uncover the link between knowledge diffusion and knowledge transfer within a dynamic model which is embedded in a stochastic environment. The model is able to replicate both, symmetric as well as asymmetric cumulative knowledge diffusion patterns. This is certainly an appealing attribute of the model, because from an empirical point of view there is no clear evidence for the existence of purely symmetric cumulative knowledge diffusion curves. Further, the model can be used directly for empirical investigations.