Diffusion policy as a remedy to the knowledge market failure

The paper provides the basic elements to understand why and how diffusion policies can be an effective tool of science and technology policy. The framework of the derived demand of technological (DDT) knowledge enables us to appreciate the positive effects of diffusion policies to remedy the market failure triggered by its limited appropriability. The implementation of adoption policies in downstream markets helps contrast the negative effects of the limited transferability of knowledge, fostering the shift of the demand of new goods and consequently of the upstream DDT knowledge with positive effects on both its price and quantities.