Transcript Dia 1 - Globelics Academy

The Globelix Academy
Tampere
1–12 June 2008
The Industrial Development of Finland:
From Path Dependency to Path Creation
Professor Gerd Schienstock
Research Unit for Science, Technology and Innovation Studies
(TaSTI)
University of Tampere
Finland
Tel. +358 3 3551 7202
Fax +358 3551 7265
Email: [email protected]
Gerd Schienstock
2 June 2008
Increasing interest in long-term technological
development and socio-economic change 1/2
Position A
a) Industrialized countries have to undergo a fundamental
and very rapid transformation towards a new economy
(knowledge-based economy)
b) Dictating influence of some mega-trends: globalization,
pervasive informatization of the economy or scientific–
technological revolution
c) Convergence in the development of industrialized
economies
Position B
a) Continuity in economic development, change is slow and
gradual
b) Countries retain patterns of institutional continuity and
national distinctiveness even under the conditions of
external shocks
c) Divergence in the development of industrialized economies
(path dependency)
Gerd Schienstock
2 June 2008
Increasing interest in long-term technological
development and socio-economic change 2/2
Finland
a) Fundamental and rapid transformation of
the national economy towards a
knowledge-based economy
b) Finland as a small and open economy is
particularly exposed to external pressures
Gerd Schienstock
2 June 2008
c) Finland has developed a unique model of
the knowledge-based economy (ICT
industry, social stability, ecological
sustainability)
The concept of path dependency 1/2
• Continuity in the process of technological change
• New innovations line up with earlier technological
change; they have historical antecedents of
progress
• Mechanisms behind path dependency: technical
interrelatedness, economies of scale; quasi
irreversibility (high switching costs); increasing
returns (positive feedback: learning); and social
embeddedness of techno-economic processes
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2 June 2008
• Applied to analyse technological development but
increasingly used on the organizational, sectoral,
and even on the regional and national level
The concept of path dependency 2/2
• Path dependency on the national level means that
national innovation systems develop and sustain
particular technological, organizational, institutional
and cultural characteristics
• Weak interpretation of path dependency (not
technological determinism but social dimension):
creative capability of actors; co-evolution of
technological and organizational change;
institutional embeddedness (learning within the
existing growth path)
• Problem: a negative lock-in (inferior option of
development: retarding economic growth); leading
countries in the old paradigm are likely to fall behind
due to structural, cognitive and political lock-ins
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2 June 2008
• Getting out of path dependency may become a key
problem for industrialized countries
The concept of path creation 1/2
• Important integrating continuity and discontinuity:
distinction between new technological paradigm and
national technological trajectories (Dosi)
• Discontinuities in technological development and
breakthrough innovations are associated with the
emergence of a new technological paradigm
• Continuity is related to learning processes along a
national technological trajectory as the dynamic
aspect of technological paradigms
• Five building blocks to analyze processes of path
creation:
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2 June 2008
1. window of new techno-organizational opportunities (new
technological paradigm)
2. the prospect of new businesses and markets
3. pressures coming from external socio-economic factors
(globalization)
4. key change events (economic crisis, political instability)
5. human will to change things (agency problem)
The concept of path creation 2/2
• The development of a new path, not a sudden break
from the old one; new path interacts with the old
paths and sectors, dynamic process of interaction
(transformation of the old paths and shaping the
developing new path: multitude of paths)
• Path creation as a contested terrain; confrontation
between the forces of change and those of
persistence, but also between different groups of
modernizers
• Problem of “homing” the new paradigm:
strengthening the diffusion capacity of an economy
(demand factors)
Gerd Schienstock
2 June 2008
Finland’s transformation process 1/2
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2 June 2008
Path dependency was based on the forest cluster until the
late 1980s; dynamic growth of the forest cluster with
constantly widening exports after WW II
Development of a new path became visible in the
beginning of the 1990s
Lock-in: inefficient use of capital and labour in the forest
cluster indicated by comparatively low productivity and
efficiency, shrinking global competitiveness in the 1980s
Deep economic crisis: industrial production shrank by
about 10 per cent, GDP shrank by about 20 per cent,
unemployment close to 20 per cent other causing factors:
breakdown of the Soviet Union, economic slowdown
worldwide, inefficient macro-economic management
Finland’s transformation process 2/2
Gerd Schienstock
2 June 2008
•
New technological paradigm: digital, mobile paradigm in
ICT, huge innovation potential
•
Global pressures: Finland as a small open economy is
particularly pressured by global competition forces
•
New markets: creation of a common Nordic market
through the establishment of the NMT (Nordic Mobil
Telephone) Standard
•
Agents of change: business people, scientific community,
and policy makers (national project)
•
Conflict between traditional industries and emerging
telecommunication sector
•
“Homing”: diffusion of ICT within the whole economy and
society
Key characteristics of the old and the new
Finnish Growth Model 1/3
Phase of path-dependent
economic development
Gerd Schienstock
2 June 2008
Phase of creation of a new growth path
Domination of the forest
cluster (resource-based)
Development of the ICT
cluster (knowledgebased)
Adaptation of the
forest cluster
(knowledge-based)
Concentration of
expertise
Wood growing,
harvesting and
processing, engineering,
chemicals
Electronics
(telecommunications)
Biotechnology
(liquefied wood and
electronics (eprinting)
Output
Material goods (wood,
pulp, paper)
Material (mobile
phones, networks) and
immaterial goods
(software, content)
Increasing
importance of
immaterial goods
Firm structure
Greater number of
medium-sized
companies
One global player,
network of SMEs
Few global players,
network of SMEs
Competition
Price and quality
competition,
geographical proximity,
competition but also
knowledge flows
Global (innovation)
competition
Global competition
Key characteristics of the old and the new
Finnish growth model 2/3
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2 June 2008
Sourcing
National suppliers (small
farmers as forest owners)
Global sourcing
Global sourcing
Supplying external
markets
Exports
Global production
Global production
Production system
Large scale production,
technology-based
production system,
bureaucratic control
structure but responsible
autonomy on shop-floor
ICT-based internal and
external networks,
focus on high value
added functions
Increased technoorganizational flexibility,
increasing focus on
high value added
functions
Management
philosophy
Social partnership
American management
principles: shareholder
value
American management
principles: shareholder
value
Core groups of
employees
Skilled and semi-skilled
employees
Highly educated
engineers (knowledge
workers)
Highly educated
engineers (knowledge
workers)
Research and
development
Little R&D investment in
core companies, higher
R&D investment in supplier
firms
High R&D investment,
innovation networks
(partly outsourcing of
R&D)
Increasing R&D
investment in core
companies
Type of innovation
Primarily process
innovations, incremental
product innovations
Radical product,
process,
organizational, and
service innovations
Increased radical
product and service
innovations
Key characteristics of the old and the new
Finnish growth model 3/3
Gerd Schienstock
2 June 2008
State influence
Interventionist state,
centralized steering (large
national programmes),
short-term macroeconomic policy
Supportive state, long-term, firm-centred
innovation-enabling policy, discursive coordination (Science and Technology Policy
Council), policy networks
Financial system
National banks and major
shareholders, long-term
credits, patient capital
(insider system), little
venture capital
Foreign ownership, global credit and capital
markets, impatient capital (outsider system),
rapidly growing (private) venture capital
Science–industry
relations
Science as independent
social system, little cooperation between the two
spheres, science
universities, academic
traditionalist doctrine
Science as part of the innovation system, close
co-operation between science and industry,
networked universities, partly entrepreneurial
universities
Education system
Secondary institutional
education
Tertiary education, technology-oriented
polytechnics
Culture
Trust in the efficiency of
centralized planning,
inward orientation
Trust in the efficiency of markets and competition,
outward orientation
Society
Support from core groups
in the society
Decreasing dependency on Finnish society
Characteristics of the Finnish technology and
innovation policy
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Transformative: initiating and sustaining structural
change (from a resource-based towards knowledge-based
economy)
High road strategy (knowledge-based economy)
Holistic restructuring approach (national systems of
innovation)
Anticipatory institutional change: prepare for
technological breakthrough (education and science)
Consensus-based (discourse co-ordination)
Reflexive learning (based on fixed goals, for example, R&D
investments, competitive benchmarking to identify
weaknesses, culture of evaluation)
Demand orientation
Increasing importance of social innovations:
organizational forms, networking and institutional
adaptation
Socially integrative (Nordic welfare state)
Internationalization: becoming a key hub in global
knowledge flows and networks
Is the new Finnish path sustainable?
Finland as a knowledge-based economy in
the making
Gerd Schienstock
2 June 2008
Problems concerning economic sustainability:
• Dependency on one sector: telecommunications,
extension of the knowledge-based economy to other
sectors: increasing knowledge-intensity of resourcebased economy; establishing new sectors: biotechnology, trans-sector co-operation
• In the telecommunications cluster equipment
production is still dominating; increasing focus on
software and content production
• Dominance of one global firm (Nokia) (exit option),
growing ICT network, institutional embeddedness
• Continuous industrial restructuring in the ICT sector
and fusion of technologies can easily undermine
Nokia’s position, new strong competitors (Microsoft,
Vodafone, Apple, etc.)
Is the new Finnish path sustainable?
Social sustainability
• Linkages between the knowledge-based economy
and the welfare state: the two-thirds society,
independent of each other, mutually reinforcing
each other (Finland: job creation in the ICT sector
and reduced unemployment, differences between
rich and poor people have increased, social services
have been reduced to some extent but the traditional
Nordic welfare state has survived
Gerd Schienstock
2 June 2008