What is the “knowledge economy”? knowledge-intensive industries and distributed knowledge bases 28 Nov. 2003 Marco Bravo José Coutinho Paulo Rebelo

What is the “knowledge economy”?

knowledge-intensive industries and

distributed knowledge bases28 Nov. 2003• Marco Bravo• José Coutinho• Paulo Rebelo

Objectives1. Assess some of the issues involved in the

concepts:

– knowledge-intensive industry;

– knowledge based / learning economy:

2. Criticize the idea that knowledge economy should be identified with high-tech industries

‘knowledge economy’ is only meaningful in terms of widely-spread knowledge intensity across economic activities, including ‘low technology’ sectors;

3. Propose the concept of distributed knowledge base for industries:

– A methodology for mapping the knowledge base of an economic activity

4. Analyze the breadth in innovation activity.

Contents• Background:

– The Knowledge Economy;

– Knowledge-intensive industries;

– Expenditures on knowledge creation;

– The role of knowledge and learning in innovation across industries;

• Distributed knowledge bases;

• Innovation objectives, knowledge sources, and the benefits of breadth;

• Conclusions;

Background

• Public policies for science, technology and innovation aim:

Creating and diffusing knowledge

• Knowledge-intensive industries

Growth

• New type of knowledge-driven economy;

• New form of knowledge society;

The knowledge economy

• Knowledge-based economy:

=> Knowledge as an input to economic processes has fundamentally changed;

• Advances in ICT => Paradigm shift:

– Basic changes in economic functioning;

– Changes in the economic rules of the game;=> for both business and policymakers

– High levels of financial Stock Prices;

The knowledge economy• Definition:

– There is no coherent definition;

– Widely-used metaphor;

• OECD, 96:

– Economies which are directly based on the production, distribution and use of knowledge and information;

– covers everything and nothing• all economies are in some way based on knowledge;

• directly information products;

• Four views about the changed significance of knowledge: =>

The knowledge economy1. Knowledge is more important than before as

an input:

– ‘Knowledge is now becoming the one factor of production, sidelining both capital and labor’ (Peter Drucker, 98)

• knowledge cannot be incorporated into production except via investment function of investment is often to implement new knowledge in production technology;

• In OECD:

– physical investment 2,5x > than ‘knowledge’ investment as a percentage of GDP;

– ‘knowledge’ investment is growing faster than physical investment (USA, Nordic countries & France). The opposite in Italy, Japan, Australia, Belgium, Germany, Austria, Netherlands and UK)


2. Knowledge is more significant than before as a product:

– Knowledge-intensive business services sectors are growing

• NOT as an independent source of growth;

• As a connecting process within the innovation system;

– This should direct our attention to economy-wide aspects of the use of knowledge;


3. The use of Codified knowledge as a component of economically relevant knowledge bases is rising:

– extension of formal education• employment for people with HE is growing in OECD

– uses of codified results of science• growth of citations to basic science in patents

– It is not clear either they are new, or that they represent some new role for knowledge


4. The role of ICT

– 'Even if we should not take the ICT revolution as synonymous with the advent of the knowledge-based economy, both phenomena are strongly interrelated … the ICT system gives the knowledge-based economy a new and different technological base which radically changes the conditions for the production and distribution of knowledge as well as its coupling to the production system’ (Lundvall and Foray, 96)

Knowledge refers to understanding and competence

The knowledge economy• The role of ICT (cont)

– ICT is an information resource - makes major changes to our ability to handle data and information:

• plays a new role in knowledge production and distribution;

• does not necessarily create knowledge or even extend knowledge;

– It is a reorganization of the technical and financial terms on which a resource (information) is available

• NOT new mode of economy;

• NOT new social functioning;

– Not proved that ICT Investments leads > growth output and productivity;


• All economic activity rests on knowledge– in our society– in all forms of human society

• Paleolithic society, Bushmen, Australian aborigines

– Animal behavior, Finding food and water, Pyrotechnology, Symbolic communication


• Knowledge has been and continues to be a core foundation of the economic process– Important for policymakers to have an

understanding of the relevance, structure and characteristics of knowledge across industries

• Knowledge society => not well conceptualized– NOT that is unimportant or irrelevant– BUT more care should be taken in

formulating and using the term

Example:

• CONTINENTAL´s web of knowledge

base

Knowledge-intensive industries

• Knowledge-intensive industries?

• Firms and industry expenditures on knowledge creation: the empirical evidence;

• The role of knowledge and learning across industries;

• SURVEY…

Expenditures on knowledge creation

CIS 92


CIS 92

What is the “knowledge economy”?

knowledge-intensive industries and

distributed knowledge bases28 Nov. 2003• Marco Bravo• José Coutinho• Paulo Rebelo

Objectives

1. Assess some of the issues involved in the concepts

– knowledge-intensive industry– knowledge based / learning economy

2. Criticise the identification of– knowledge economy with– high-technology industries (as

conventionally defined)

3. Propose the concept of distributed knowledge base for industries

– A methodology for mapping the knowledge base of an economic activity

Contents

• Background– The Knowledge Economy– Knowledge-intensive industries– Expenditures on knowledge creation– The role of knowledge and learning

in innovation across industries

• Distributed knowledge bases• Conclusions

Background

• Public policies for science, technology and innovation aim=> Creating and diffusing knowledge

• Knowledge-intensive industries=> Growth

• New type of knowledge-driven economy

• New form of knowledge society


• Knowledge-based economy=> Knowledge as an input to economic

processes has fundamentally changed

• Advances in ICT => Paradigm shift– Basic changes in economic

functioning– Changes in the economic rules of the

game=> for both business and policymakers

– High levels of Stock Prices


• Definition– There is no coherent definition– Widely-used metaphor

• OECD, 96– Economies which are directly based

on the production, distribution and use of knowledge and information

– covers everything and nothing• all economies are in some way based on

knowledge• directly => information products

• Four views about the changed significance of knowledge =>


1. Knowledge is more important than before as an input

– ‘Knowledge is now becoming the one factor of production, sidelining both capital and labor’ (Peter Drucker, 98)• knowledge cannot be incorporated into production

except via investment• the function of investment is often to implement

new knowledge in production technology

– There is no real separability– Investment as a percentage of GDP in

OECD: ‘physical’ > 2.5x ‘knowledge’


2. Knowledge is more significant than before as a product

– Knowledge-intensive business services sectors are growing• NOT as an independent source of growth• As a connecting process within the innovation

system

– This should direct our attention to economy-wide aspects of the use of knowledge


3. The use of Codified knowledge as a component of economically relevant knowledge bases is rising

– extension of formal education• employment for people with HE is growing in OECD

– uses of codified results of science• growth of citations to basic science in patents

– It is not clear either they are new, or that they represent some new role for knowledge


4. The role of ICT– 'Even if we should not take the ICT

revolution as synonymous with the advent of the knowledge-based economy, both phenomena are strongly interrelated … the ICT system gives the knowledge-based economy a new and different technological base which radically changes the conditions for the production and distribution of knowledge as well as its coupling to the production system’ (Lundvall and Foray, 96)

=> Knowledge refers to understanding and competence


• The role of ICT (cont)– ICT is an information resource - makes

major changes to our ability to handle data and information

• plays a new role in knowledge production and distribution

• does not necessarily create knowledge or even extend knowledge

– It is a reorganization of the technical and financial terms on which a resource (information) is available and Foray)

• NOT new mode of economy• NOT new social functioning

– ICT Investments ≠> growth output and productivity


• All economic activity rests on knowledge– in our society– in all forms of human society

• Paleolithic society, Bushmen, Australian aborigines

– Animal behavior, Finding food and water, Pyrotechnology, Symbolic communication


• Knowledge has been and continues to be a core foundation of the economic process– Important for policymakers to have

an understanding of the relevance, structure and characteristics of knowledge across industries

• Knowledge society => not well conceptualized– NOT that is unimportant or irrelevant– BUT more care should be taken in

formulating and using the term


• Classification developed by the OECD (mid-1980s)

Classification R&D intensities (% of turnover)

High-technology(ICT, pharmaceuticals)

> 4%

Medium-tech(vehicles, chemicals)

1% - 4%

Low-tech(textiles, food)

< 1%

!!! Technology intensity is not mapped solely by intramural R&D


• Serious Problem– Knowledge-intensive as opposed to

traditional or non-knowledge-intensive industries

– It ignores the fact that the knowledge which is relevant to an industry may be distributed across many sectors or agents

– A low-R&D industry may well be an major user of knowledge generated elsewhere


• The high-tech sector thus defined is small? Driving the growth process? Significant effect on overall

economic growth• US has the largest share of high-

tech in manufacturing – High-tech sector in US < 3% of GDP

• US Share analysis (1980 => 1995)– Share of high-tech manufacturing in

total GNP rose one percentage point


• Modern innovation theory– knowledge creation in a much more

diffuse way => Chain-link model of innovation


• Modern innovation theory1. Discovery => Learning

• Recombine and adapt existing forms of knowledge• Design and trial production (Engineering) can be

knowledge-generating activities

2. External environment of the firm• Purchase of intermediate or capital goods embodying

knowledge• Installation and operation• Purchase of licenses to use protected knowledge

3. Explore their markets• Innovations economic implementations of new

ideas• Market information => creation of new products• Properties of markets => Framework for the

recombination and knowledge creation• R&D => Problem solving activities (≠ initiating act of

discovery)


CIS 92


CIS 92

Conclusions

The Knowledge Economy– The knowledge-based economy is

an umbrella concept: it allows one to gather existing ideas and concepts on science and technology, and any indicators, into a conceptual framework, i.e.: all under one roof (Godin)

The role of knowledge and learning in Innovation across industries

• Innovation capability(-) less in terms of the ability to discover

new technological principles(+) diverse competences in learning

• involving complex interactions between R&D, technology acquisition, finance, design, production engineering, market exploration, human resource development (including the acquisition of tacit knowledge), and so on

• Learning (Innovation theorists)(-) Learning processes(+) Institutional structure of knowledge

creation across economies(+) Components of knowledge and firm-

level competence (Lundvall and Johnson)


• Technological Knowledge Base of a firm or industryAreas of production-relevant

knowledge1. Firm-specific knowledge2. Generally applicable knowledge3. Sector or product-field specific knowledge

1. KBs of particular firms are highly localised, and specific to very specialised product characteristics

2. Generally applicable knowledge• General scientific KB• Molecular biology, solid-state physics, genetics

or inorganic chemistry => close connections with major industrial sector


3. Industry or product-field level• Industries often share particular scientific and

technological parameters• technical functions, performance

characteristics, use of materials, ...of products• Public KB (accessible knowledge which in

principle available to all firms)• Shapes the performance of all firms in an

industry• It is developed, maintained and disseminated

by institutions of various kinds• it requires resources (often on a large scale)

Distributed knowledge bases

Chain-link model of innovation

• K – R - lines through knowledge to research and return paths. If problem solved at node k link 3 to R not activated.

• D – direct link to and from research from problems in invention and design.

• I – support of scientific research by instruments, machine tools and procedures of technology.

• S – financial support by firms of underlying science, applied anywhere along the chain

Definition: A distributed KB is a systemically coherent set of knowledges, maintained across an economically and /or socially integrated set of agents and institutions


• Knowledge base for (many) industries– Not internal– Distributed (technologies, actors,

industries, ..)

• Empirical analysis of the content– Forms of knowledge (involved in an industry)– The articulation of these knowledges– Their flow across industries (two basic forms)

• Embodied flows involve knowledge incorporated in to machinery and equipment

• Disembodied flows (and spillovers) involve the use of knowledge, transmitted through scientific and technical literature, consultancy, educations systems, movement of personnel and so on


Research-intensive industries

Other (receiving) industries

Products

• Machines / Equipment

• Components / Materials

• Advanced materials

• Chemicals

• ICT

• Capital / intermediate inputs into the production processes

Performance improvements

Productivity / Quality improvements

CompetitivenessEmbodied flows

Skills and competences to use these advanced knowledge-based technologies


Examples of some major Norway (apparently low-tech) industries

Fishing (Embodied / Disembodied flows)New materials and design concepts in ships

– fluid mechanics, hydrodynamics, cybernetic systems

Satellite communications

Global positioning systems

Safety systems

Sonar technologies– complex acoustic research

Optical technologies for sorting fish

Computer systems for realtime monitoring and weighing

– computer architectures, programming research and development, and ultimately on research in solid-state physics


Examples of some major Norway (apparently low-tech) industries

Fish-farming (Embodied/Disembodied flows)Pond technologies

– based on advanced materials and incorporating complex design knowledges– wave analysis, CAD/CAM design systems, etc

Computer imaging and pattern recognition technologies for monitoring (including 3D measurement systems)

Nutrition and health technologies– biotechnology, genetic research and pharmaceutical inputs)

Sonars

Robotics (in feeding systems)


• Empirical research (Norway)– Map KBs by identifying and

describing the following basic aspects of industrial production:1. Key activities / technical phases of production2. Key techniques (capital inputs, equipment,

instruments and production routines)3. Knowledge bases / Technologies / Knowledge

area4. Institutional framework / Research suppliers


• KBs (i): the oil and gas sector– Phases, key activity, technique and

knowledge base• The acronyms refer to institutions within the

Norwegian science and technology infrastructure - for details see Appendix 1

– Key points• The wide array of knowledge inputs across many

activities, and• The very substantial number of science and

technology infrastructure institutions which are involved in generating, supplying or maintaining them.

• In this figure we include only specifically Norwegian infrastructural institutions - we are not including specialised suppliers, or international institutions.


Key activities, techniques, knowledge bases and research institutions in different phases of the Norwegian offshore sector





• KBs (ii): Food products – one of the largest manufacturing

industries in all OECD economies– Nine categories of activities were

identified• Four describe different stages in the process of

transforming the raw product• Two have to do with the actual product - raw

products as well as end products• Three include activities supporting the actual

products and production process


Activities, technology/knowledge areas and knowledge network in the Norwegian food processing industry



• KBs (ii): Food products– Two main knowledge areas

• Food science, including food related chemistry, biology and physics

• Food technology including biotechnology, electronics, instrumentation and engineering.

– Low levels of internal R&D– One of the most knowledge-

intensive sectors of the entire economy

• Many of the sub-sectors of the industry are rapidly growing

Conclusions

• Modern economies are in some sense more knowledge-intensive– Sectors of the “new economy”– Traditional industries

• KBs of traditional industries– Cognitively deep and complex– Moreover institutionally distributed– Generated via 'knowledge systems'

Conclusions

• Growth trajectories of the advanced economies are based– Creation of new sectors (ICT, biotech)– Internal transformation of sectors which

already exist (engineering, food, wood products, vehicles, ..)

=> rests on complex innovation systems which create, distribute and maintain advanced (often basic scientific) knowledge

• 'Low tech' industries are knowledge intensive, and are frequently part of 'high-tech' systems, and policy-makers should be aware of their significance for growth

References

• “What is the knowledge Economy? Knowledge-intensive industries and distributed knowledge bases”, Smith (2000)

• “Innovation objectives, knowledge sources, and the benefits of breath”, Leiponen and Helfet (2003)

• “Innovation expenditures in European industry”, Rinaldo Evangelista, Tore Sandven, Giorgio Sirilli and Keith Smith (1997)

References

• “The Knowledge-Based Economy: Conceptual Framework or Buzzword?”, Benoît Godin (2002)

Conclusions

• Greater breadth– Innovation objectives– Knowledge sources

• Benefits success at the firm level– Industries, Economies

• Significantly and positively correlated with the probability that– The firm succeeds in innovating– “value” of innovations (% of sales

derived from newly introduced innovative products)

Documents

What is the “knowledge economy”? knowledge-intensive industries and distributed knowledge bases 28 Nov. 2003 Marco Bravo José Coutinho Paulo Rebelo