The price of intellect in the knowledge economy

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The price of intellect in the knowledge economy
EUROPOS SAJUNGA Europos socialinis fondas

• Dr Lynn Martin
• Director, Entrepreneurship and Innovation
• Lynn.martin_at_uce.ac.uk 
• University of Central England, Galton, Perry
  Barr, Birmingham, B42 2SU, United Kingdom

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Who am I?

• My perspective and background
• Development of work on innovation policy and
  practice
• Knowledge economy issues related to Asia and
  Europe
• Innovation in action working with business
• UK contexts
• The Knowledge Economy has been a feature of UK
  policy since 1996, with earlier refers to related
  issues
• the UK is the largest market in Europe for online
  business information, with a 38.9 share.
• Knowledge based industries employ more people in
  Sweden (54), the UK (51) than the USA (38)
• Significant differences in integration behavior
  of Anglo-American and European corporates, the UK
  groups are much closer to the US than to
  continental Europe groups, integrating research
  across categories

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West Midlands

• Home to 9 total UK population MIxture of rural
  and urban areas
• Birmingham - highly diverse population.
• Birthplace of industrial revolution now 18 of
  all jobs in manufacturing, especially innovation
  based knowledge intensive
• makes 50 of the UK's jewellery 60 of all
  media activity- 60 of craft firms, 40 of
  literature / drama

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University of Central England

• Characteristics
• Strong university-industry linkage the
  Knowledge Exchange
• Strong international student base especially from
  Asia
• 30,000 students over 300 courses covering a wide
  range of subject areas in 7 faculties
• Birmingham Conservatoire
• Birmingham Institute of Art Design, BIAD
• Birmingham School Of Acting
• Faculty of Education
• Faculty of Health
• Faculty of Law, Humanities, Development Society
  
• School of Business and Computing
• Technology Innovation Centre

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Paper and presentation

• Wide topic / Key themes?
• Perspectives, social construction, assumptions
• Historical background
• Definitions
• Knowledge Economy and Knowledge Worker
• Workplace implications
• Changes in workplace practice
• Psychological contracts
• Case studies
• Lithuania and the Knowledge economy

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Social construction

• What is social construction?
• Views of the world
• How does it relate to the knowledge economy?
• Enterprise and self efficacy
• Innovation and invention
• Intention and aspiration

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Assumptions

• That knowledge has replaced other assets, land,
  capital and physical resources as a source of
  competitive advantage
• That knowledge gaps impede national /
  organisational economic advantage
• That knowledge implies intellect plus technology,
  e.g., knowledge applied technology
• That at the heart of the development of the
  knowledge economy is continuing innovation
• That innovation will result in a successful
  economy, i.e., increased wealth, employment
  generation, social equality
• That working practices will change due to the
  rise of the knowledge economy, with more
  temporary jobs for highly skills knowledge
  workers, with more telecommuting

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What is the knowledge economy?

• what you get when organisations bring together
  powerful computers and well-educated minds to
  create wealth. .. firms in the knowledge economy
  compete on their ability to exploit scientific,
  technical and creative knowledge bases and
  networks (Workplace Foundation, 2006)
• Knowledge-based industries are defined as high to
  medium tech manufacturing (e.g. pharmaceuticals,
  aerospace, electrical engineering) financial and
  business services telecommunications and
  education and health (OECD, 1999)
• Given the pace of globalisation and the
  inter-connectedness of global networks and
  markets, those without a knowledge economy will
  be left behind. Where knowledge is a key
  component of manufacturing and services, then the
  economy will grow without knowledge having this
  role, the economy will falter in this new global
  marketplace (Lithuania, UNECE 2003)

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Knowledge gaps

• National drive to meet knowledge gaps
• Internationally
• Regionally
• Socio-economic impacts
• Impacts of perceived knowledge gaps include drive
  to support education, lifelong learning,
  investment in R D, development of new
  technologies the Lisbon agenda

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The Lisbon agenda

• 2000 The Lisbon agenda
• "the most competitive and dynamic
  knowledge-driven economy by 2010.. the most
  competitive and dynamic knowledge-based economy
  in the world, capable of sustainable economic
  growth with more and better jobs and greater
  social cohesion". 20 m new jobs
• 2005 Community Lisbon Programme
• To modernize our economy - securing our unique
  social model in the face of increasingly global
  markets, technological change, environmental
  pressures, and an ageing population meeting
  present needs without compromising future
  generations. The policy measures fall under 3
  main areas
• Knowledge and innovation for growth,
• Making Europe a more attractive place to invest
  and work,
• Creating more and better jobs

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The Lisbon agenda

• Historical contexts
• New pressures
• Impacts internationally
• Lifelong learning and the Lisbon agenda
• The pressure to innovate

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Definitions

• Of the knowledge economy
• Of knowledge workers

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Characterising the knowledge economy

• Advances in scientific and technical knowledge
  enable an ICT revolution, plus the engineering of
  materials at the molecular level, and new life
  forms via biotechnology.
• Rapid reduction in transportation and
  telecommunications costs
• Integration of previously disparate economies via
  ICts, trade etc.
• Digitization and informatization reduce
  transaction costs and increase productivity.
• Development of a service-based economy, pervasive
  activities needing intellectual content
• Increased emphasis on HE and life-long learning
  to use the rapidly expanding knowledge base.
• Massive investments in R D, training,
  education, software, branding, marketing,
  logistics, and similar services.
• Intensified competition between enterprises and
  nations via new product design, marketing
  methods, and organizational forms.
• Continual restructuring of economies to cope with
  constant change.

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Knowledge workers- who are they?

• Would you recognise one if you saw one?
• Knowledge workers work in specific sectors/
  knowledge workers have particular capabilities,
  e.g., a knowledge worker has the capacity to

• act autonomously and reflectively
• to use tools effectively and interactively
• to join and function in socially heterogeneous
  groups (OECD, 2003)

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How does intellect relate to knowledge economy
issues?

• What is intellect?
• Higher education, connectedness, reflexivity,
  opportunity recognition, knowledge
• Knowledge v information
• Tacit v explicit (Nonaka and Taguechi)
• Contexts in knowledge, collective v
  individualistic
• Intangible assets
• Patents,
• trademarks,
• recorded and unrecorded design

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Valuing intellectual assets

• Statutes and regs
• WTO, WIPO etc
• IAS ref IAs 38
• Valuing a knowledge worker
• Knowledge
• Context and competition
• International contrasts
• India and China
• US, Nordic, Japan

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Historical perspectives

• How has the Knowledge Economy concept developed?

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The KE Concept

• Historical contexts
• The industrial revolution of the 19th century and
  the scientific revolution of the 20th century
  supported the rise of the knowledge-based
  economy.
• 1880s - 1960s, a European middle class emerged
  based on knowledge embedded in professional
  functions in industrial society, e.g., engineers,
  chemists, doctors and teachers.
• In this type of knowledge society professional
  status was based on learning, training and the
  recognition and accreditation of expertise
  (Darenty, 2003 Collins, 1979).
• knowledge was held within a protected group and
  performed useful functions.

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  Post-industrial society in the 1960s and 1970s

• 1960s-80s shift in working practice from
  manufacturing to services New Class emerged,
  broader than the earlier professional and
  including all parties in society, transformed by
  developments in ICTs during 1990s.
• Knowledge and hence the knowledge society -
  transcends national boundaries and hence
  represents a global phenomenon (Castells, 1996).
  
• A new kind of politics increasingly about the
  risks from science and technology, contemporary
  society is more and more organised around
  democratically shaped kinds of knowledge
  cultures (Darenty, 2003, citing Beck, 1992
  Giddens, 1994).
• Knowledge is central to the social functioning
  and fabric society (Nowotny et al, 2001).

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Post-modern perspectives on the knowledge society

• emphasises context in the expression of meaning.
  Hence knowledge without context is meaningless
  interpretation and individual world view supply
  meaning and value to knowledge.
• Darenty also suggests that this ideology is
  countered by neo-liberalism and has led to the
  evolution of higher education as McUniversity.
• While neo-liberalism seeks to reconstruct society
  in the image of a political doctrine, higher
  education has been restructured to meet the needs
  of efficiency and control through accountability.
  
• Where postmodernism rejects the idea of society
  for a notion of culture, neo-liberalism rejects
  society for the ubiquity of the market. -major
  impacts on higher education.

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Higher education and the knowledge economy

• In Mrs. Thatchers words, there is no such thing
  as society, only markets and individual
  consumers (Guardian, 1985).
• In responding to this, universities have
  developed new bureaucracies that have reduced
  individual academic autonomy to enable the mass
  production of higher education (Parker Jary,
  1995).
• The results of this are seen in higher student
  numbers, rationalistic approaches to management,
  increased centralization, with efficiency and
  accountability as watchwords
• Oxford University
• current changes to introduce managerially
• what are universities for?

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Working practices

• Anticipated and reality

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Working practices

• Reduction of those in permanent long term
  employment relationships
• Increase in home/teleworking (Sharkie 2005)
• Employees move from relational to transactional
  psychological contracts
• Psychological contracts non legal part of work
  relationship based on implied promises, and their
  effects on mutual reciprocity

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Psychological contract

• Tacit and implicit factors impact on the formal
  agreement, i.e., the employer and employee
  expectations of the employment relationship
  (Cornelius, 2001).
• Based on individual views of the world, informed
  by previous experience and by current
  perceptions hence people in the same roles may
  have different psychological contracts (Rousseau,
  2001a). This is further compounded by other
  factors such as gender, age, lifestyle etc (Guest
  and Conway, 1998).
• Relational contracts based on trust, loyalty, job
  security and long-term relationships
• Transactional contracts based on instrumental
  constructs, long hours or extra work are
  exchanged for high pay and for training and
  development to aid their further employability
  elsewhere (Smithson and Lewis, 2006 71).

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Counter views

• Work changes Anticipated
• Increased home working, flexibility and job
  tenure, gold collars
• Work practices reported
• As least 92 per cent with permanent employment
  contracts in 2000, up from 88 per cent in 1992.
• 5.5 per cent on a temporary work contract of less
  than twelve months in 2000, compared with 7.2 per
  cent in 1992.
• Proportion of employees working on fixed term
  contracts (i.e,1-3 years) down to 2.8 per cent
  from 5 per cent in 1992.
• The permanent job remains very much the
  overwhelming UK norm across occupational
  categories. (Taylor 2002 12)
• More people travel from home to a place of work,
  not home/ teleworking
• Biotechnology fails to make money (Harvard
  Business Review, 2006)

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Cases to illustrate KE concepts

• Bizbrother
• Advantage Creative
• Individual firms

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Case study Biz Brother
Purpose to engage those not connecting with
enterprise form different societal groups Story
board 4 characters in the Enterprise House, all
competing as in Big Brother, with Bizbrother
voice etc Tasks find Role models, finance as
tasks Happy ending all win! Screened on TVs in
Bizcom events and in faculties, followed up
online IPR characters and story LM/UCE context
Endermol, Netherlands
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Case study Advantage Creative

• Purpose of the fund / Reasons for its existence
• information asymmetry and moral hazard
• Impacts on the creative sector
• 10m for equity gaps in company start up or growth
• Typical company, Heath IT application
• Assets based on intellectual capacity of owner
  and technological expertise and on new technology
  being developed no physical assets
• No track record and idea hard for lenders to
  understand
• 250,000 initial loan ROI 45 in 18 months

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Small firm examples

• Hannah Reynolds Mischievous Marketing
• 6 years running web design business, now runs
  company designing and carrying out marketing
  strategy for middle sized firms
• Deborah Leary Forensic Pathways
• 5 years as CSI equipment firm, now developing iT
  based tools for crime agencies to aid detection,
  managing knowledge

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Case study Lithuania

• Prospects for the Knowledge economy
• Policy emphases national and EU
• Potential developments
• Issues
• re IT and innovation
• Re enterprise
• How is the intellect related to KE devt?

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Lithuania

• KE perspectives

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Lithuania implementing the knowledge-based
economy

• a quick integration of the enormous intellectual
  resources of economies in transition into the
  European intellectual pool, stimulating the
  development of the former Soviet countries
  (UNECE, 2003).
• Priority sectors biotechnology,
  pharmaceuticals ICTs, laser technologies and
  electronic components and mechatronics.
• Targets
• increase GDP by 2-2.5 times
• to reach 50 of the average level EU GDP per
  capita by 2015
• increase the labour market by 10.
• Education a key component, i.e, improvements in
  systems and in professional skills and
  re-training, supported by measures for IT and
  trade.
• The need to boost trade in intellectual products
  and services, both internally and externally,
  making them priorities in the State investment
  program.

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Lithuania KE trends

• Fundamental shift from traditional industries but
  some firms with core competitive strengths, rapid
  growth and increased exports, e.g., wood
  processing and furniture making transport sector
  (services in the W-E, N-S directions) food
  manufacture (dairy / meat products) and
  construction.
• In 2001, ICT market, the largest of Baltic
  States, valued at 806 Eu m, up from 723 Eur m in
  2000, a growth of 11.5 . Lithuanian ICT market
  grew by 11.5 in 2001 (European IT Observatory
  2002), or 30 (INFOBALT)
• Despite positive GDP growth and strong export
  performance, employment stagnant, 1995/ 2000
• jobless growth - typical of most transition
  economies in Central and Eastern Europe. Due to
  productivity improvements are associated with
  intensive restructuring.
• Higher - Public spending on education, primary
  and secondary education enrolments, adult
  literacy
• Lower employment, maths and science scores for
  8th graders lower, tertiary enrolment,
  availability of management training, and adult
  continuing education

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World Bank studies - Lithuania
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Final comments

• The knowledge economy is firmly established in
  the psyche of policymakers as a real concept
  based on innovation and particular types of
  knowledge
• To support the development of a KE, education ,
  technology and application are needed
• To be a knowledge worker requires non-technical
  assets
• Intellect remains a key asset in this society
  but which type of intellect?