Paper to be presented at the DRUID Summer Conference 2006 on KNOWLEDGE, INNOVATION AND COMPETITIVENESS: DYNAMICS OF FIRMS, NETWORKS, REGIONS AND INSTITUTIONS Copenhagen, Denmark, June 18-20, 2006 Track: IA: Networks and Knowledge Creation, Accumulation and Exchange KNOWLEDGE FLOWS IN NETWORKS: EXTENDING EXISTING CONCEPTS THROUGH THE ANALOGOUS APPLICATION OF CIRCUIT THEORY. Authors Dr. Ross Barnard, Biotechnology Program, School of Molecular and Microbial Sciences, University of Queensland, St. Lucia, Queensland, Australia 4072. Telephone: 61-7-3365-4612 Email: rossbarnard@mailbox.uq.edu.au Dr. Damian Hine, UQ Business School, University of Queensland, St. Lucia, Queensland, Australia 4072. Telephone: 61-7-33651549 Email: d.hine@uq.edu.au (Corresponding author) Dr. John Kapeleris, Deputy CEO, Australian Institute for Commercialisation, Telephone: 61-738535294. Email: john.kapeleris@ausicom.com Date of submission: 26 th April, 2006. Abstract This paper introduces the concept of virtual circuits and draws on recent concepts of network modelling and design to introduce a “probabilistic gate theory” described using matrices. It can be used to model multi-step information flow between people within organizational networks, to provide formal definitions of efficient and balanced networks and to describe distortion of information as it passes along human communication channels. Creative leaders are more likely to emerge at information rich nodes in networks. Such nodes can be defined and formalized mathematically. These do not invariably correspond with centrality as defined by early work on networks. Keywords: Knowledge flows, virtual circuits, probabilistic gate theory. JEL - code(s). D83, D85. 1