Transcript presentation - Globelics Academy

From the Economics of Knowledge to
the Learning Economy
Globelics Academy
May 2, 2007
Bengt-Åke Lundvall
Why focus on economics of
knowledge?
 In international organisations – OECD, UN, World
Bank, European Commission - it is now
recognised that competitiveness and economic
progress is based upon knowledge.
 In the management literature it is increasingly
recognised that knowledge is the strategic
ressource – knowledge needs to be managed!
 But how to understand Knowledge and Learning
in this context? What are the implications for
economic theory, innovation policy and
knowledge management?
Understanding knowledge is a key to
intelligent management and policy!!!
 Uneven development and inequality as reflecting the
uneven distribution of knowledge.
 What kind of knowledge matters for economic
performance?
 How easy/difficult is it to ’transfer’ or ’learn’ different
kinds of knowledge.
 To understand and master the process of knowledge
creation and learning is a key to intelligent management
and to intelligent economic development strategies!!
The complex task of knowledge policy
Knowledge policy and institutions have to do two
opposite things at the same time:
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1. Protect intellectual property – refers to knowledge as
a public good – information is easy to transfer (Arrow
1959 and Nelson 1959)
2. Promote knowledge diffusion and sharing – refers to
knowledge as tacit and local – know how-knowledge is
difficult to transfer (Marshall 1923).
Today the balance has gone too far toward
protection!! Protecting those who have knowledge
already.
The complex task of knowledge
management – two trade-offs
 Externally: Protecting core competences
while sharing knowledge in networks and
technological alliances: Knowledge as an
’exchange marker’.
 Internally: Formalising employee
knowledge for sharing through ICT – while
exploiting informal knowledge embodied in
employees.
Is knowledge a public good?
Public good is characterised by being Non-rival and
Non-excludable.
 Arrow and Nelson from around 1960 knowledge
as public good calls for government intervention.
IPR for specific knowledge. Government subsidy
or production for generic knowledge.
 Marshall (around 1920) on industrial district – cf
Silicon Valley. Knowledge is local and not easy to
move from one place to another.
 To solve this contradiction we need to make
distinction between different kinds of knowledge.
Economics: Information as commodity
– the insights of Kenneth Arrow
 Market failure

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Buyer uncertainty about the value of information
Seller keeps it when selling it
Buyer can sell it to others after he has bought it
Easy to reproduce once it has been produced
 Policy issues

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Intellectual property rights to give incentives to
knowledge producers
Public production or subsidies to knowledge producers
What matters for economic
performance is competence rather
than information!
 OECD has shown that in most countries a major
part of aggregate economic growth can be
explained by changes inside firms in terms of
innovation and growth.
 The diffusion of new technology and especially of
new organisational characteristics is very uneven
among firms in the same sector and across sectors.
 To enhance the competence and ’the absorptive
capacity’ of firms is a major challenge not
addressed by standard economics.
Economics: Skills and competence as
commodity
 Skills are partially tacit and embodied in people and
organisations - cannot be sold or bought separately.
 Access to skills through hiring, through mergers and takeovers and through networking.
 Labour market dynamics affect skill formation.
 Knowledge management and the codification issue
 Underinvestment in skill formation within firms - people
move on from one firm to the next.
 Policy issue: Competition clause, employee share holding
(c.f. IPRs) may slow down learning at the level of society.
Collective versus individual tacit and
explicit knowledge
Individual
Collective
Tacit
Personal
skill
Shared
routine
Explicit
Manual
Org. Chart
Taxonomy for knowledge (Lundvall and
Johnson 1994)
 Individual competence
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Know what – facts about the world
Know why – scientific laws in relation to
nature and society
Know how – how to use tools and
concepts
Know who – know who knows what and
what to do
Organisational competence
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Know What=Shared information - data
bases
Know Why=Shared models of
interpretation (including company
stories)
Know How=Shared routines
Know Who=Shared networks
Information technology and its impact
on the different kinds of knowledge
 Know-what in data bases - limits of search
machines
 Know-why in global science networks - on the
need to have absorptive capacity
 Know-how in expert systems - on the limits of
skill codification
 Know-who in registers of firms - on the
importance of trust and the social dimension.
Codification of Tacit Knowledge
 A transformation of tacit knowledge that
makes it explicit. Sometimes difficult:
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Write down how you solve a mathematical
problem
Write down how you prepare the food.
Write down how you swim
Write down how you make diagnosis of a
patient – Exp. Syst.
Write down how you manage the firm - MIS
Tacit versus codified knowledge
 Tacit knowledge
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Tacit by nature
Tacit for economic reasons - too costly to codify
 Explicit and codified knowledge
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How much of the knowledge package can be codified?
How wide is the access to the codified knowledge
(specialised codes, communities of practise,
epistemological communities).
Tacit versus codified knowledge
 Know how (biking, swimming but also
management and research) has always elements of
tacit knowledge
 Codification of know-how is always incomplete lack of distinction between more or less complete
codification.
 Codification as an economically determined
activity - a crucial element of knowledge
management
The learning economy concept
 First introduced in Lundvall nsi-book 1992
 Developed into hypothesis about speed-up in Lundvall
Johnson 1994
 Inspired and supported by labour market analysis at OECD
1992-95.
 The social dimension made explicit 1995
 Systematic research on learning economy - Testing the
hypotheses - 1996 Relevance for China and other emerging economies 2005-
The learning economy – as analytical
and historical perspective
 We can work from the hypothesis that
learning has become dominant feature

Learning economy as alternative to information
economy or knowledge-based economy.
 We can use the learning economy as
analytical perspective

We study how the institutional set up of the
economy/the firm affects learning and how learning
affects economic performance
The mechanism: Selection, transformation
and speed-up of change and learning
 Globalisation and new technology and deregulation of
markets together speed up the rate of change in many
sectors.
 In the learning economy a lot of new knowledge is created
but a lot is also destroyed - creative destruction
 Intensified competition selects firms that are rapid learners
and firms select rapid learners as employees.
 Rapid learners innovate and impose change on the rest of
the economy.
 As a result there is a speed-up of change with positive
impact on competitiveness but with negative impact on
social cohesion.
The social dimension of the learning
economy – the model
 Social cohesion promotes learning but learning based
growth undermines social cohesion. Calls for public policy
to redistribute learning opportunities and learning
capabilities = New New Deal (cf Roosevelt in US 1930s)
Growth
Learning
Social cohesion
Social cohesion is
especially
important for
DUI-mode of
learning. Less
important for STImode.
The Learning Economy compared to
other concepts!
 Service economy
 Information society
 Intangible economy
 Knowledge based economy
The learning economy challenges these concepts:
1. Focus on dynamics rather than on the state of
the system.
2. Bringing in explicitly the social dimension
(learning as a social and interactive process).
Learning economy in historical
perspective – testing hypotheses
 ’The learning economy’ reflects an acceleration of
change
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Shorter product life cycles and shorter life time for competences
(halving time = 1 year for computer engineers)
Speed-up of learning confirmed by labour market surveys in the
UK (Tomlinson 2005).
 Polarisation in the labour market
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Unskilled workers and regions with weak learning capacity
becomes worse off.
Polarisation confirmed: Management and engineers learn the most
– female unskilled workers the least – UK.
Income distribution between and within regions and countries
becomes more skew – when there is no government intervention!
Policy implications of the learning
economy-perspective
 Education: Educate in order to establish learning
capability. Give access to life long learning.
 Labour markets: Need for labour market institutions and
trade unions that support competence building (new
workers’ contracts emphasising competence building).
 Firms: Promote the diffusion of learning organisations.
 Income distribution: Need for new new deal with focus on
redistribution of learning capability.
 Innovation policy: Promoting DUI and STI-modes
 Responsibility of last resort for the public sector –
otherwise only the already skilled get more training.
Learning organisations
 Learning organisations:
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Are more flat and allow horizontal communication
inside and outside the organisational borders
Establish cross-departmental and cross-functional
teams and promote job-circulation between functions.
Delegate responsibility to workers and invest in their
skills
Establish closer co-operation with suppliers, customers
and knowledge institutions.
An important source of competence
building is the learning organisation
 Learning organisations and networking
organisations (in Denmark)
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Create more and more stable jobs
Are more productive
Are more active in terms of product innovation
Why are learning organisations more
successful in the learning economy?
Learning economy as analytical
perspective
 Learning in formal education
 Learning by searching – R&D – STI-learning
 Learning in practise – DUI-learning
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Learning to become a member of a community of
practise or of an epistemological community.
Learning by doing, using and interacting
Learning as worker vs. Learning as consumer
Apprenticeship
 Interactive learning
STI-mode and DUI-mode of learning
 STI=Science-Technology-Innovation mode is
characterised by science-approach – formalisation,
explicitation and codification – knowledge policy
as ´science policy’ – knowledge management as
ICT-based knowledge-sharing.
 DUI=Learning by Doing, Using and Interacting
mode refers to experience-based, implicit,
embedded and embodied knowledge.
DUI-learning mode - indicators
Indicators: The organic and integrative organization
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Interdisciplinary workgroups
Quality circles
Systems for collecting proposals
Autonomous groups
Integration of functions
Softened demarcations
Cooperation with customers
STI-mode of learning - indicators
 Expenditures on R&D as share of total
revenue
 Cooperation with knowledge
institutions
 Indicator for workforce composition
Probability to introduce product
innovation (corr. for sector, size and ownership)
DUI/STI
DUI
STI
%-share
19.1
26.7
11.7
Low
learning
42.5
Odds ratios
5.064
2.218
2.355
1.000
P-value
<.0001
0.002
.0051
Operational dimensions of the
learning organization
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
Cross occupational working groups
Integration of functions
Softened demarcations
Delegation of responsibility
Self directed teams
Quality circles/groups
Systems for collection of employee proposals
Education activities tailored to the firm
Long term educational planning
Wages based on qualifications and functions
Wages based on results
Closer cooperation with customers
Closer cooperation with subcontractors
Closer cooperation with universities and technological institutes
A normal distribution of the 2000
firms over the scale from 0-14
Diagram 1: Index of organization - reflecting quality control, human development efforts, compensation
systems and external communication (n = 2007)
300
250
Frequency
200
150
100
50
0
1
2
3
4
5
6
7
8
Index
9
10
11
12
13
14
15
Logistic regression – probability for
prod. innov. compared to benchmark
Variables:
Highly developed +
Medium developed +
Manufacturing +
Construction Business services +
100 and more +
Danish group Single firm -
Effect
5,18***
2,20***
2,35***
0,69***
2,27***
1,61***
0,76**
0,58***
Employment 1992-97 and product and
innovations 1993-95 (index 1992=100)
Nov. 92
Nov. 94
Nov. 97
P/S
92.764=100 103,6
Innovative
105,5
No P/S
42.368=100 102,5
Innovative
97,1
The double change in context
 ICT and access to elements from the
science base becomes increasingly
important for firms in all sectors – calls for
a strengthening of STI-mode of learning
 But these changes and globalisation
contribute to speed up and to the formation
of the learning economy – calls for a
strengthening of DUI-mode of learning