The Socio-Economics of Knowledge and the learning economy

1. The Socio-Economics of Knowledge and the learning economy Globelics Academy May 2004 Bengt-Åke Lundvall

2. Different perspectives on the production and use of knowledge. • Marx on Machinery producing Machinery - to systematically use knowledge to produce knowledge we need to develop (interdisciplinary) theory and data. • From information to competence to wisdom. • Key issues: codification and the transferability of knowledge.

3. Knowledge and learning - important distinctions • Knowledge and learning • Information versus skills • Learning by listening and reading versus learning by doing, using and interacting. • Individual versus organisational knowledge and learning

4. Information as a commodity (Simon part I) • Market failure • 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 • Intellectual property rights • Public production or subsidies

5. Broadening the perspective: Information versus skills • Too much information! - Takes skills to select, interpret and use information. • Skills are always partially tacit and they have to be learnt through experience. • Artisans/Skilled workers but also Managers and Scientists get wellpaid because of their skills not because of the information they have. • Learning skills is an interactive and social process - it has an ethical dimension - trust (social capital) is of key importance for this kind of learning.

6. The economics of skills and competence – market failures • Skills are partially tacit and embodied in people and organisations - cannot be sold or bought separately. • Access to skills through hiring, through mergers and take-overs and through networking. • Labour market dynamics affect skill formation. • Competition clause, employee share holding (c.f. IPRs) • Knowledge management and the codification issue • Underinvestment in skill formation within firms - people move on from one firm to the next.

7. Perspectives on the economy

8. Knowledge taxonomy • Know what • Know why • Know how • Know who

9. 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

10. Why codification matters It affects transferability between people, organisations and sites • Mode of transfer (knowledge as a resource • Information may be communicated through telecommunication • Competence transfer is a process of interactive learning – or moving people • Commodification (creating assets) • Information may be sold (CD, Soft-ware) as a commodity. • Transforming competence into expert systems involves a loss of content and it can only be done when the competence is simple and works in a stable environment. People and organisation embodied!

11. 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 in Cohen etc. • Codification as an economically determined activity - a crucial element of knowledge management

12. Transformation of tacit into codified knowledge - costs and benefits • Advantages • Memory (mobility of people, multiequlibria) • Commodification • Transfer • Cumulativeness in innovation • Disadvantages • Time-consuming • Lock-in • Vulnerability for imitation • Distribution of power • Loss of competence

13. The Learning Economy Globelics Academy May 2004 Bengt-Åke Lundvall

14. Structure of the presentation • The learning economy - a new perspective on economic dynamics • Change and learning • Selection, transformation and speed-up of change • Social and economic exclusion in the learning economy • Competence building at the firm level • Hiring, training and networking • Implications for knowledge management • Implications for policy making

15. Characterising the learning economy • More rapid transformation • shorter product life cycles • shorter life time for competences (halving time = 1 year for computer engineers?) • more frequent shifts in working tasks • New kind of competition • Learning based rather than knowledge based • Success of people, firms and regions reflect capability to learn • Inherent polarisation in the Learning Economy • Exciting but stressful for the rapid learners - exclusion of slow learners • End of European regional convergence

16. Cumulative circular processes in the learning economy • Selection, transformation and speed-up of change and learning • Intensified competition selects firms that are rapid learners and firms select workers who are rapid learners. • 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 high social costs. • Transformation pressure is increasingly determined at the Global and European level. • Need to slow-down change in some areas (hi tech global industries) and to speed it up in others (construction and agriculture)? TOBIN- and BIT-taxes?

17. Basic mechanisms in the learning economy and the impact of different policies • Transformation pressure • Macro economic policies • Competition policies • Trade policies •  • Capability to innovate and to adapt to change • Human resource development policies • Labour market policies • Innovation policies •  • Redistribution of Costs and benefits of change • Tax and other income transfer policies • Social policy • Regional policy

18. On the need to integrate and co-ordinate three sources of competence for the firm

19. An important source of competence building is the learning organisation • Learning organisations and networking organisations (in Denmark) • Create more and more stable jobs • Are more productive • Are more active in terms of product innovation • But they constitute only 10-15% of all firms • Shop stewards and middle management are strategic agents of change

20. Learning organisations • We define learning organisations as those that: • Are flatter and allow more 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. (In DK such firms also tend to engage in both indirect and direct forms of employee participation.)

21. What firms can do when exposed to stronger competition • Reallocate and increase efficiency in utilising resources • Enhance the capability to respond to change • Move into new geographical markets • Introduce new products and enter/establish new product markets • Build learning organisations aiming at new competences in order to create long term capability to respond to intensified competition

22. Employment in dynamic firms (introduced at least one product innovation 1993-95 and used advanced management techniques) and static firms (did neither) • Nov. 92 Nov. 94 Nov. 96 Nov. 97 • Dynamic firms 70.227=100 103.5 103.5 106.6 • Static firms 24.983=100 99.7 96.0 93.4 • Entire DISKO subset 137.445=100 103.0 101.4 102.5

23. Employment for unskilled workers in static and dynamic firms 1992-97 • Nov. 92Nov. 94Nov. 96Nov. 97 • Strongly increased competition • Dynamic firms 16.500=100 100.3 96.9 102.1 • Static firms 4.218=100 92.3 81.9 75.0 • Somewhat increased or milder competition • Dynamic firms 11.262=100 101.5 98.5 102.0 • Static firms 5.862=100 99.3 97.0 93.5