Transcript The Knowledge Revolution and the Need to Develop Country

Knowledge Strategies for
Development:
Challenges for Korea
Carl Dahlman
World Bank
KEDI WB Workshop
Balanced Regional Development and the Role of Higher Education
Pohang
February 23, 2004
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Structure of Presentation
1. Economic Growth in Historical Perspective
2: The Knowledge Revolution
3. A Knowledge Economy Framework
4: Benchmarking Korea in the Global
Knowledge Economy
5: Challenges for Korea in New Context
6: Critical Issues for Korea’s Competitiveness
7: The Role of Regional Innovation Systems
and Clusters
8: Some Tough Issues for Discussion
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1: World GDP/Capita and Population
World GDP/capita and Population
A Two Millennium Perspective
GDP per
capita
World
Population (mill)
6000
7000
5000
6000
5000
4000
4000
3000
3000
2000
2000
1000
1000
World GDP per capita (1990 international $)
1998
1950
1870
1800
1720
1640
1560
1480
1400
1320
1240
1160
1080
1000
920
840
760
680
600
520
440
360
280
200
120
0
0
0
World Population (Million)
Source: Angus Maddison, The World Economy : A Millennial Perspective, OECD: Paris, 2001
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Growing Differences in GDP/Capita
Per Capita GDP for Selected Regions or Countries
(1990 international $, 1480-1998)
30000
25000
Western Europe
Eastern Europe
20000
United States
Latin America
15000
Japan
China
10000
India
5000
Other Asia
Africa
0
1480
1560
1640
1720
1800
1870
1950
1998
Source: Angus M addison, The World Economy : A M illennial Perspective, OECD: Paris, 2001
%
Shares of World GDP - Constant US$ (1960 - 2002)
40
High income: OECD ex. US & Japan
35
Sub-Saharan Africa
30
United States
25
High Income: Non-OECD
(Black)
20
Japan
Middle East & North Africa
(Light Blue)
South Asia
Europe & Central Asia
(Grey)
15
10
Latin American & Caribbean
East Asia & Pacific
5
0
1960
1965
1970
1975
1980
1985
1990
1995
2000
Eight Fastest Growing Economies
(constant 1995 US$)
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Growth Depends on Successful
Knowledge Strategies
At lower level of development (and S&T
capability) it depends largely on effectively
tapping into global knowledge (playing rapid
catch-up)
At higher levels of development (and S&T
capability) it also depends critically on own
innovative effort
Korea and Taiwan have already made the
transition from being primarily catch-up
economies to becoming innovating economies
GDP/Capita Growth: Korea vs Ghana
Knowledge makes the Difference
between Poverty and Wealth...
14
Thousands of constant
1995 US dollars
Rep. of Korea
12
Difference
attributed to
knowledge
10
8
6
4
2
Ghana
0
1960
1965
1970
1975
1980
1985
1990
1995
Difference
due to
physical
and human
capital
2000
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2.The Knowledge Revolution
Ability to create, access and use knowledge is
becoming fundamental determinant of global
competitiveness
Seven key elements of “Knowledge Revolution”
Increased codification of knowledge and
development of new technologies
Closer links with science base/increased rate of
innovation/shorter product life cycles
Increased importance of education & up-skilling of
labor force, and life-long learning
Investment in Intangibles (R&D,education, software)
greater than Investments in Fixed Capital in OECD
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The Knowledge Revolution – cont.
Greater value added now comes from investment in
intangibles such as branding, marketing, distribution,
information management
Innovation and productivity increase more important
in competitiveness & GDP growth
Increased Globalization and Competition
• Trade/GDP from 38% in 1990 to 52% in 1999
• Value added by TNCs 27% of global GDP
Bottom Line: Constant Change and Competition Implies
Need for Constant Restructuring and Upgrading
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Implications for Developing Countries
Developing Countries run of risk of being left behind
as a result of increasing importance of knowledge
and of a widening knowledge divide with advanced
countries.
They need to develop coherent strategies to deal
successfully with the constant restructuring resulting
from the knowledge revolution.
They will need to make more effective use of
knowledge for their development--to become
knowledge economies.
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3: The Knowledge Economy
There are many definitions of the
“Knowledge Economy”, many
emphasizing just information technology
and high technology
We take a broader definition:
“An economy that makes effective use of
knowledge for its economic and social
development. This includes tapping
foreign knowledge as well as adapting and
creating knowledge for its specific needs.”
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Framework for Using K4D
Four Key Functional Areas
Economic incentive and institutional regime
that provides incentives for the efficient use
of existing and new knowledge and the
flourishing of entrepreneurship
Educated, creative and skilled people
Dynamic information infrastructure
Effective national innovation system
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KAM Methodology 2004
 KAM: 76 structural/qualitative variables to
benchmark performance on 4 pillars
 Variables normalized from 0 (worst) to 10
(best) for 121 countries
 www.worldbank.org/kam
 Multiple modes offering wide range of
graphic representations and functionalities
(1995 - Most Recent, comparison options)
 Aggregate Knowledge Economy Index (KEI)
– average of performance in 4 pillars – KI
 Weighted and unweighted version –
Innovation Variables
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Basic Scorecard for Korea: 1995-2002
Internet users per 10,000 people
GDP grow th (%)
10
Computers per 1,000 persons
Human Development Index
Tariff & nontariff barriers
5
Telephones per 1,000 (mainlines +
mobile)
Rule of Law
0
Tertiary Enrollment
Regulatory Quality
Secondary Enrollment
Researchers in R&D / million
Patent applications granted by the
USPTO / million
Scientific and technical journal articles /
million
Adult literacy rate (% age 15 and above)
Korea
1995
Most Recent Data
4: Knowledge Economy Index
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5: Challenges for Korea
Korea is caught between higher
technological capability of Japan (and
advanced countries) and lower wage
costs of China (and other developing
countries)
Needs to continuously move up the
value chain and create profitable
activities aimed at international
markets, and not just in manufacturing
15 Largest Economies: GDP 2002 (Trillions of international $)
Ave RGDP per capita
growth 1990-2002 (%)
9
China
$5.73t
7
South Korea
$0.78t
5
France
$1.55t
India $2.69t
United Kingdom
$1.51t
3
Canada
$0.90t
Spain $0.85t
Indonesia
$0.66t
1
Mexico $0.88t
Brazil $1.31t
0
5,000
10,000
United States
$10.14t
Italy $1.48t
Germany $2.17t
Japan 3.26
15,000
20,000
25,000
-1
Russia $1.41t
-3
GDP per capita (international $) 2002
30,000
35,000
Special Characteristics of Korea
High investments in R&D as share of GDP—
almost 3.0%
High investments in Education as share of
GDP--11-12%, counting cost of tutoring
But not clear it is getting corresponding
return from such high investments
Very centralized development
Seoul: 47% population, 53% economic power,
73% corporate R&D centers, 77% venture
business, 80% top 10 universities, 80% of public
R&D
Industrial production very heavily dominated by
large chaebol companies
6: Critical Issues for Korea
How to get bigger economic return
from large investments in R&D and
education?
How to participate effectively in the
global and regional economy?
What is the role of regional
innovation systems?
Challenges in R&D and Innovation
Korea does invest a lot in R&D and has
technological leadership in some areas but it
is still relative small in global scale
Korea needs to improve the productivity of its
R&D investments
Korea needs to improve climate for innovation
Universities do very little R&D
Most R&D and patenting is being done be few
large chaebol
Need to create a more favorable climate for
innovation
Average Scientists &
Engineers in R&D (per mil
persons)
Average Total R&D Expenditure: Top 20 Economies
1997 - 2000 (Bil of International $)
Japan
$90.5b
5000
Finland
$3.6b
Sweden
$7.2b
United States
$230.8b
4000
Russia
$9.3b
Australia $6.7b
Switzerland
$5.3b
Belguim
$4.6b
3000
Canada $13.8b
Germany $47.2b
France $29.6b
United Kingdom $23.9b
2000
Austria
$3.7b
Spain $6.5b
Netherlands
$7.7b
South Korea
$16.2b
Israel $3.6b
Italy $13.7b
1000
China $34.4b
Brazil $9.8b
0
0.0
0.5
1.0
1.5
2.0
2.5
Average R&D Expenditure (% of GDP)
3.0
3.5
4.0
World Shares of USPTO Patent Count (1980 - 2001)
excluding US and Japan
%
9
Germany
8
7
6
5
United Kingdom
4
Sweden
Netherlands
Taiwan
3
France
2
Germany
South Korea
1
0
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
Challenges for Education and Training
Stock challenge: rapid creation and diffusion of knowledge
means even adults constantly have to learn, therefore need
Multiple mechanisms for continuous training beyond formal
education system
To exploit potential of information and communications
technologies to expand training opportunities
Effective system for skills assessment and certification
Flow challenge: education system must teach students how to
learn through their lifetime regardless of when they leave it:
implies need for
Better teaching and learning pedagogies for core skills
Broader interdisciplinary approaches
Financing mechanisms to expand access and improve
quality
Need to address both stock and flow challenges through
better approach to life-long learning
Reform and re-allignment of public and private roles
As well as domestic and foreign
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Improving the Performance
of Education and Training
Improve productivity of education
Increase efficiency through less regulation, more
accountability, greater flexibility to respond to needs of
productive sector
Improve incentive regime for teachers and faculty
Change the content of education
Improve critical thinking and problem solving skills,
Improve communication skills and ability to work in groups
Teach learning to learn
Develop more effective system of lifelong
learning
More flexibility in terms of multiple pathways to different
competencies
Develop better system of just in time training
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Participating More Effectively in
Global Economy
Increasing strategic alliances
With foreign firms
With foreign research institutes
With foreign universities
Moving up global value chains
Becoming more productively integrated into global
value chains controled by companies from other
countries
Further developing own brands and distribution
networks
Moving beyond manufacturing to services
7: What is Role of Regional
Innovation Systems?
Regional innovation systems and
clusters
Four key institutions in clusters
The critical role of the university
Fostering clusters
Implications for policy
Regional Innovation Systems and Clusters
There is some evidence that dynamic clusters
contribute to a region and a county’s
competitiveness
Clusters are defined as geografic
concentrations of interconnected companies,
specialized suppliers, service providers, firms
in related industries, and associated
institutions that compete but also cooperate
(Porter 1998, On Competition)
Key benefit of clusters seems to be the
externalities that result from specialization,
information, and knowledge exchange, which
reduce transactions costs and permit greater
innovation and productivity increase
Key Institutions in Clusters
Four key institutions
Universities
Research Institutes
Firms
Local Government
But real key is the network of interactions
among them that produce value
Therefore policy should focus not so much on
the key institutions, but their interactions
Hardest part is how to achieve such
combinations effectively and with what
instruments
Critical Role of the University
Education and Training
Training scientist and engineers, as well as entrepreneurs,
and professionals
Should not be limited to formal training, but to lifelong
training
Therefore must be very responsive to needs of firms in
cluster
Science and Research
In Korea universities are not so strong in research
Therefore research effort has to be strengthened
But it must be relevant to needs of surrounding business
But perhaps key role is actually in facilitating
networks
Relationship with former students and class networks
Contract research to industry or research centers
Public forums for discussion
Fostering Clusters
Many efforts focus on strengthening
individual components of cluster
But most critical is the interaction among the
elements of cluster
Therefore efforts have to give greater
attention to programs that foster that
interactivity
Joint research
Contract research from firms to universities and
research institutes
Mobility of personnel among three agents
Skills development programs
Fostering Interactivity
Should go beyond specific region to
interaction with other clusters in country
Many strong clusters exits in Korea
There are strong complementarities among manuy
of them
But should also include fostering interaction
with clusters in other countries because of
increasing globalization of knowledge
Exchanges of experiences and personnel
Research and production linkages
8:Some Tough Issues for Discussion
How many regional innovation systems to
push for?
What is the role of targeting and special
incentives?
Is there a risk that pushing for too many may
compromise excellence and national
competitiveness?
Is there a trade-off between equity and
excellence?
What are best strategies for promoting
regional innovation systems?
How proactive a role can national or even local
government take vs supporting or facilitating role
What is role of private sector in general and
chaebol in particular?
Annex
KAM Normalization Procedure
•Absolute values
•Allocation of rankings
•Normalization (0-10)
Formula:
Normalized (u) = 10*(Nw/Nc)
•Normalized (u) – normalized score
allocated
•Nw – no of countries with worse
ranking
•Nc – total sample of countries (121)
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Innovation – Size matters
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Innovation : Size matters – unweighted version
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Average GDP/Capita Growth Rates
1965-2002
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