Correct Answer: The transfer of knowledge from one firm to another in the same industry

Solution : The correct answer is (a)  The transfer of knowledge from one firm to another in the same industry

The "knowledge spillover" effect refers to the unintentional transmission or diffusion of knowledge and ideas from one entity to another, resulting in benefits or advantages beyond the original recipient. In the context of economics, it often refers to the transfer of knowledge between firms operating in the same industry or related industries.

When one firm develops new technologies, processes, or innovations, there is a possibility that this knowledge will spill over to other firms, leading to productivity gains, improved processes, or the development of new products and services within the industry. These spillover effects can enhance the overall competitiveness and efficiency of the industry as a whole.