What is Knowledge Spillover?

Legal Definition
Knowledge spillover is an exchange of ideas among individuals. 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. Such innovations often come from specialization within an industry.

A recent, general example of a knowledge spillover could be the collective growth associated with the research and development of online social networking tools like Facebook, YouTube, and Twitter. Such tools have not only created a positive feedback loop, and a host of originally unintended benefits for their users, but have also created an explosion of new software, programming platforms, and conceptual breakthroughs that have perpetuated the development of the industry as a whole. The advent of online marketplaces, the utilization of user profiles, the widespread democratization of information, and the interconnectivity between tools within the industry have all been products of each tool’s individual developments. These developments have since spread outside the industry into the mainstream media as news and entertainment firms have developed their own market feedback applications within the tools themselves, and their own versions of online networking tools (e.g. CNN’s iReport).

There are two kinds of knowledge spillovers: internal and external. Internal knowledge spillover occurs if there is a positive impact of knowledge between individuals within an organization that produces goods and/or services. An external knowledge spillover occurs when the positive impact of knowledge is between individuals without or outside of a production organization. Marshall-Arrow-Romer (MAR) spillovers, Porter spillovers and Jacobs spillovers are three types of spillovers.
-- Wikipedia