Complexity and fungeability afe two specific aspects of knowledge indivisibility. Complexity matters when the production of new knowledge requires the combination of diverse and yet complementary bits of knowledge. Fungeability is found when some units of knowledge can apply in a variety of different contexts, different produets and different processes. Both knowledge complexity and knowledge fungeability are the cause of increasing returos in the generation of
knowledge. The govemance of the distribution of knowledge instead is affected by decreasing returns to the variety of elements of knowledge. Exchanges in the markets for knowledge are limited by transaction costs. Intenalization of different bits of knowledge is constrained by coordination costs. Firms can take advantage of knowledge complexity and fungeability by means of networking in regional space.