ICT and the “new” regional economy Luc Soete MERIT-Infonomics University of Maastricht Think-In on “Dublin in the Knowledge/Digital

ICT and the “new” regional economy

Luc SoeteLuc SoeteMERIT-Infonomics MERIT-Infonomics

University of MaastrichtUniversity of Maastrichthttp://www.infonomics.http://www.infonomics.nlnl

Think-In on “Dublin in the Knowledge/Digital Age-Creating the Worlds Think-In on “Dublin in the Knowledge/Digital Age-Creating the Worlds Most Intelligent City”, Department of Taoiseach, June 21Most Intelligent City”, Department of Taoiseach, June 21stst, Dublin., Dublin.

21 June 2002 Luc Soete Taoiseach Think In 2

Outline Outline

The Digital/Knowledge EconomyThe Digital/Knowledge Economy The Systemic Features of Knowledge The Systemic Features of Knowledge

Creation and Diffusion Creation and Diffusion The Local/Regional Growth patterns in The Local/Regional Growth patterns in

EuropeEurope The Impact of ICT on regional/local The Impact of ICT on regional/local

developmentdevelopment


1.The emerging 1.The emerging digital/knowledge economydigital/knowledge economy As the industrial society came about when As the industrial society came about when

machines started to produce machines (Marx) so machines started to produce machines (Marx) so the knowledge society emerges when knowledge is the knowledge society emerges when knowledge is used to produce knowledge.used to produce knowledge.

From IT to ICT also a From IT to ICT also a communicationcommunication revolution: revolution: contrary to electricity the sending of information contrary to electricity the sending of information does not involve significant energy loss. Hence does not involve significant energy loss. Hence distance becomes irrelevant (death of distance).distance becomes irrelevant (death of distance).

Mobile digital communication removes effectively Mobile digital communication removes effectively the last physical geographical barrier. New the last physical geographical barrier. New Marshall “any place, any where, information and Marshall “any place, any where, information and communication is in the air”.communication is in the air”.


A. Output Growth Impact of A. Output Growth Impact of ICTICT Traditional/standard growth impacts:Traditional/standard growth impacts:

– Growth in geographical tradability of goods and in Growth in geographical tradability of goods and in particular servicesparticular services

– Growth in possibilities of versioning of goods and Growth in possibilities of versioning of goods and servicesservices

– Increase in time “valuation” (e.G. Contingency Increase in time “valuation” (e.G. Contingency pricing/ contracts, importance time zones)pricing/ contracts, importance time zones)

Underestimation of:Underestimation of:– Substitution-effects (“sailing-ship effect”)Substitution-effects (“sailing-ship effect”)– Appropriation problems (security)Appropriation problems (security)– Dependence on market volatilityDependence on market volatility


B. Digital TransparencyB. Digital Transparency Traditional/standard effects:Traditional/standard effects:

– ICT a logistic/distribution-revolution, reduction in ICT a logistic/distribution-revolution, reduction in transaction coststransaction costs

– Renewed importance of open versus closed standardsRenewed importance of open versus closed standards– Impact inversely correlated with product homogeneityImpact inversely correlated with product homogeneity

Underestimation of:Underestimation of:– Search costs (information asymmetry)Search costs (information asymmetry)– Need for standard specificationsNeed for standard specifications– Importance of physical trust relationships in Importance of physical trust relationships in

distributiondistribution


C. Digitalisation of Factor C. Digitalisation of Factor MarketsMarkets

Capital:Capital:– Globalization, speed, arbitrage should all lead to Globalization, speed, arbitrage should all lead to

stronger growth convergence, but also…stronger growth convergence, but also…– Lemmings-attitudes, volatility, increased Lemmings-attitudes, volatility, increased

financial risksfinancial risks Labour:Labour:

– Lower frictional unemployment, improved Lower frictional unemployment, improved connectivity with labour market, but also…connectivity with labour market, but also…

– Reduced incentives for investments in human Reduced incentives for investments in human capital and training, too high mobility, global capital and training, too high mobility, global migration pressuresmigration pressures


D. Impact of ICT on D. Impact of ICT on Knowledge ProductionKnowledge Production Increase in productivity of R&D?Increase in productivity of R&D?

– Thanks to the increase in the codification of Thanks to the increase in the codification of knowledge and of digital knowledge and of digital transparency/communication between transparency/communication between researchers researchers

Increase in diffusion of knowledge Increase in diffusion of knowledge – Thanks to digital access/transparencyThanks to digital access/transparency– Increase in rate of return to “learning” thanks to Increase in rate of return to “learning” thanks to

digital education forms, distant learning, digital education forms, distant learning, versioningversioning


2. On the Systemic Features 2. On the Systemic Features of Knowledge and Innovation of Knowledge and Innovation National systems of innovationNational systems of innovation: :

– Need for a systemic view on innovationNeed for a systemic view on innovation– Illustrates the intrinsic limits of focusing on one Illustrates the intrinsic limits of focusing on one

or two specific technology targets such as R&D or two specific technology targets such as R&D (Barcelona summit)(Barcelona summit)

– Systemic or intelligent benchmarking, but how? Systemic or intelligent benchmarking, but how? – Applicable at regional level taking into account Applicable at regional level taking into account

external relationships external relationships


R&D Intensity and Labour Productivity R&D Intensity and Labour Productivity GrowthGrowth

R&D intensity and labour productivity growth

ESIT

PT

FRGE

UK

DKBE

SU

GR

AT IR

FL

US

JP

EU

0,00

0,50

1,00

1,50

2,00

2,50

3,00

-0,50 0,00 0,50 1,00 1,50 2,00 2,50 3,00 3,50Annual growth of labour productivity, 1995-2000

BE

RD

/ G

DP

, 1

99

5 %

NL


Systemic Benchmarking: an ExampleSystemic Benchmarking: an Example

– 4 concepts emerge as particularly relevant for 4 concepts emerge as particularly relevant for a country’s competitiveness and sustainable a country’s competitiveness and sustainable employment:employment:• social and human capitalsocial and human capital• research capacityresearch capacity• technological and power to innovate technological and power to innovate

performanceperformance• absorptive capacityabsorptive capacity

21 June 2002 Luc Soete Taoiseach Think In 11TECH. & INNOVAT. PERFORMANCE

AB

SOR

TIO

N C

AP

AC

ITY

SOCIAL & HUMAN CAPITAL

RE

SEA

RC

H C

APA

CIT

Y


TECH. & INNOVAT. PERFORMANCE

AB

SOR

TIO

N C

AP

AC

ITY


RE

SEA

RC

H C

APA

CIT

Y



TECH. & INNOVAT. PERFORMANCE

RE

SE

AR

CH

CA

PA

CIT

Y

AB

SO

RP

TIO

N C

AP

AC

ITY

AUTBEL

DEU

DNK

ESP

FIN

FRAGRC

IRL

ITA

NDL

PRT

SWE

UK

AUTBEL

DEU

DNK

ESP

FIN

FRA

GRC

IRLITA

NDL

PRT

SWE

UK

AUT

AUTBEL

DEUDNK

ESP

FIN

FRA

GRC

IRL ITA

NDL

PRT

SWE

UK

BEL

DEU

DNK

ESP

FIN

FRA

GRC

IRL

ITA

NLD

PRT

SWE

UK

100

100 100

100

0


1

2

3 4

A(1

- 2

)

B(4 - 3)

A

B

A+BBIAS

Construction of the BIAS


-75.0

-55.0

-35.0

-15.0

5.0

25.0

45.0

65.0

-75.0 -55.0 -35.0 -15.0 5.0 25.0 45.0 65.0

AUT

BEL

DEU

DNKESP

FIN

FRA

GRC IRL

ITA

NDL

PRT

SWE

UK


-130.0

-80.0

-30.0

20.0

70.0

120.0

-80.0 -60.0 -40.0 -20.0 0.0 20.0 40.0 60.0 80.0

AUT

DEU

DNK ESP

FIN

FRA

GRCIRL

ITA

NDL

SWE

UKPRT

USA

JAPAN

BEL


3. 3. About Regional ClustersAbout Regional Clusters A geographical concentration of interlinked A geographical concentration of interlinked

firms and institutions in a particular firms and institutions in a particular technological area; membership within the technological area; membership within the group seems to be significant for each group seems to be significant for each member firm’s individual competitivenessmember firm’s individual competitiveness

Overwhelming Overwhelming emphasis emphasis in regional science in regional science and economic geography oand economic geography onn the “new” the “new” (rather old) agglomeration effects, strong (rather old) agglomeration effects, strong doubts as to the decentralisation impacts of doubts as to the decentralisation impacts of ICT…ICT…


Source: M. Porter


The Regional Knowledge Landscape in Europe

existence of research/knowledge/innovation policies at existence of research/knowledge/innovation policies at regional level in Europe: regional level in Europe: diversified or fragmented as one diversified or fragmented as one prefers to take a positive or negative view with uprefers to take a positive or negative view with universities, niversities, businesses, local authoritiesbusinesses, local authorities generally involved generally involved

strong concentration particularly in small countries: Europe strong concentration particularly in small countries: Europe effectively a mosaic of regional growth poles with a network effectively a mosaic of regional growth poles with a network of the so-called of the so-called motor-regionsmotor-regions: : Baden-Württemberg (D), Baden-Württemberg (D), Rhône-Alpes (F), Lombardia (I) and Catalonia (E)Rhône-Alpes (F), Lombardia (I) and Catalonia (E)

are there “new” developments beyond this rather old are there “new” developments beyond this rather old knowledge European “archipelagio”? Regional growth knowledge European “archipelagio”? Regional growth centres in Finland, Sweden, Ireland… Implications of ERA..centres in Finland, Sweden, Ireland… Implications of ERA..


RTD Regional Expenditure in the EU

•Source EUROSTAT 13/03/02Source EUROSTAT 13/03/02


High-tech patent applications per million of active population (y 2000)

•Source EUROSTAT 13/03/02Source EUROSTAT 13/03/02


Regional R/D Intensity as a share of national Regional R/D Intensity as a share of national expenditure (the 2 champion regions per expenditure (the 2 champion regions per country)country)

GERGER - Oberbayern (14%)- Oberbayern (14%) ++ Stuttgart (12%)Stuttgart (12%) = 26%= 26% GRGR - Attiki (49%)- Attiki (49%) ++ Kentriki Makedonia (18%)Kentriki Makedonia (18%) = 67%= 67% ESPESP - Madrid (32%)- Madrid (32%) ++ Catalonia (23%)Catalonia (23%) = 55%= 55% FRFR - Ile de France (45%)- Ile de France (45%) ++ Rhône-Alpes (10%)Rhône-Alpes (10%) = 55%= 55% ITIT - Lombardia (24%)- Lombardia (24%) ++ Lazio (19%)Lazio (19%) = 43%= 43% NLNL - Zuid-Holland (25%)- Zuid-Holland (25%) ++ Noord-Brabant (18%)Noord-Brabant (18%) = 43%= 43% AUAU - Wien (52%)- Wien (52%) ++ Steiermark (14%)Steiermark (14%) = 66%= 66% PP - Lisboa (54%)- Lisboa (54%) ++ Norte (21%)Norte (21%) = 75%= 75% FINFIN - Uusimaa(47%)- Uusimaa(47%) ++ Etelä-Suomi (30%)Etelä-Suomi (30%) = 77%= 77% UKUK - South East (24%)- South East (24%) ++ Eastern (18%)Eastern (18%) = 42%= 42%

(source : Eurostat - March 2002)(source : Eurostat - March 2002)


4. ICT impact on 4. ICT impact on regional/local developmentregional/local development As a complementary cluster of technologies As a complementary cluster of technologies

or rather as substitutionor rather as substitution Focus on distribution and consumption Focus on distribution and consumption

rather than just productionrather than just production Shift from typical post-war space and time Shift from typical post-war space and time

extensive development towards space and extensive development towards space and time saving thanks to use of ICT? time saving thanks to use of ICT?

Case of Dublin (MUTEIS project on the FINS)Case of Dublin (MUTEIS project on the FINS)

Documents

ICT and the “new” regional economy Luc Soete MERIT-Infonomics University of Maastricht Think-In on “Dublin in the Knowledge/Digital