In the case of low-carbon innovation, at least two well-documented market failures exist (Jaffe et al, 2005). The first, knowledge spillovers, arises because firms under-invest relative to the socially optimal level of R&D (Nelson, 1959; Arrow, 1962b, Teece: 1986; Jones and Williams 1998). Firms are unable to capture the full value of their investments in R&D because a portion of the outcomes of R&D efforts “spills over” to other parties as freely available knowledge, e.g. other firms can reverse engineer new products, and many new ideas are not patentable and are thus available to everyone once invented. (Griliches, 1992).(p.48)
Nemet, G. 2008. Demand-pull Energy Technology Policies, Diffusion and Improvements in California Wind Power. In Foxon, T, Kohler, J. and Oughton, C. (2008) Innovation For A Low Carbon Economy Economic, Institutional and Management Approaches Cheltenham: Edward Elgar
Wikipedia: Knowledge spillover is an exchange of ideas among individuals.[1] In knowledge management economics, knowledge spillovers are non-rival knowledge market costs incurred by a party not agreeing to assume the costs that has a spillover effect of stimulating technological improvements in a neighbor through one’s own innovation
marchudson.net 