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THE KNOWLEDGE ECONOMY

Kenneth E. Corey and

Mark I. Wilson

Michigan State University

March 19, 2004

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Overview

• Awareness• Layers• E-Business• Responsiveness• Talk• ALERT

CEDP Awareness

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Knowledge Economy

• An economy that relies increasingly on technology and knowledge as factors of production & wealth creation – in addition to labor & capital

• Technology & knowledge are transforming wealth-creation work from physically-based functions to knowledge-based functions

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Knowledge Economy

• Pre-eminence of knowledge and information as drivers of economic growth and development

• Part of the structural change process, and the changing significance of occupations and industries

• Challenge for planners is to understand the many dimensions and possible applications of the knowledge economy

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Economic Change

• There are jobs, and there are jobs• Job loss due to technology, outsourcing

and economic change• Loss of manufacturing jobs and low

wage/low skill technology jobs

• High-paying IT occupations generally have expanded since 1999

• More than 70,000 computer programmers lost jobs since 1999; More than 115,000 higher paid computer software engineers gained since 1999

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Economic Change

• Each qtr, US economy generates more jobs than are projected to be lost to offshore outsourcing over the next decades

• Outsourced and offshore jobs also benefit US based firms

• Underscores the need to understand how firms are changing the way they function

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Michigan Planning and Development Regions

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Development Defined

• A widely participatory process of social change in a society intended to bring about both social and material advancement (including greater equality, freedom, and other valued qualities) for the majority of people through their gaining greater control over their environment. (Rogers, Communication Research, 1976, P. 225)

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EDA Investment Guidelines

• Market based

• Proactive in nature & scope

• Plan beyond immediate horizon, anticipate economic changes & diversify local & regional economy

• Maximize attraction of private sector investment & would not otherwise come to fruition absent EDA’s investment

• Have a high probability of success

• Higher-skill, higher-wage jobs are created

• Maximize return on taxpayer investment

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Internet Use

• Recent survey of Internet use in Michigan (Jan/Feb 2004)

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CEDP Layers

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World Knowledge Regions

Biotech/Pharma Specialization

Tech Clusters: Brennan & Smart Zones

Biosciences Firms Specialization

Tertiary Education

Empty Areas/New Areas/New Spaces

Mediated by E-Responsive Regions

Mediated by Spatial Distribution of Distressed Areas

Hierarchy of Multiple Layers

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E-Business Spectrum: In the Information Age and the Global Knowledge

EconomyProduction Functions Consumption

(e-commerce) FunctionsAmenity and Quality

of Life Factors

Science & Technology-driven Research & Development (C)

Online Procurement: B2B & B2G (D)

Social, Cultural and Institutional Activities (C & D)

Commercialization of Products & Services (C)

Online Retailing: B2C & G2C (D)

Natural Environmental Attributes (C)

Business & Producer Services (C) & Manufactured Products (D)

Value-Added Complementarities between Electronic and Physical Channels (C & D)

Educational and Human Capital Capacity Building and Quality (C & D)

The functions and factors that are characterized by clustering and spatial concentration are identified with a “C.” Those that are characterized by dispersion and spatial deconcentration are identified with a “D.”

Relations & Processes

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Biotech and theLife Sciences Corridor

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Responsiveness

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Responsiveness

• How well prepared are Michigan’s cities and regions?

• The importance of recognizing change and preparing for new conditions

• ‘Learning Regions’ are areas where residents and firms are upgrading skills and competitiveness

• Responsiveness is built into institutions and public and private organizations

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Regional E-Readiness

• Survey of directors of Michigan’s 14 planning regions by James Brueckman

• Many recognized the importance of technology, but many not well versed in its characteristics.

• Need for increased awareness and ICT oriented strategic planning.

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Economic Development

• Review of web sites of Michigan’s 83 counties and 14 planning regions for economic development content by Karan Singh

• 25% of counties and 14% of planning regions did not have a web presence

• Based on their web sites, counties classified as leaders (8%), contenders (13%), followers (24%) and laggards (46%)

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E-Responsiveness

• Combine e-Readiness and Web-based economic development effectiveness to produce the e-responsiveness measure

• Most e-responsive areas in Michigan are in the southern and most populous regions of the state

• Least e-responsive areas bracket north and south and nearby the most populous and developed southern corridor of the state

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CEDP Talk!

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Intelligent Development

• Draws on contemporary research and theory

• Aware of best planning practice• Investments in places and regions for

wealth creation, higher wage employment and improved quality of life

• Development planning, therefore, is “intelligent” when these best practices are influenced by appropriate theory and the latest science and technologies are utilized fully to develop a community and region holistically and multifunctionally, including amenity factors

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Implications

• Scenarios for intelligent development• State/regions as passive or proactive?• Focus not only on success at advanced

end of spectrum, but there is the need for benefits also to serve distressed areas of the state

• Regional planners can engage in intelligent development to plan for more competitive sub-state planning regions in the global knowledge economy

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Distressed Communities

Geography of Economic Distress

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Geography of E-Responsiveness

Scenario 1

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Scenario 1

• Action options:

• Most e-responsive and economically distressed.

• Somewhat e-responsive and Economically distressed.

• Least e-responsive and Economically distressed.

• Most e-responsive and Not economically distressed.

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Spreading the Benefits

Pre-Existing Potential Institutions

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Planned Relationships

Scenario 2

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Human Resources Linkages

Education Institutions + Performance

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Enterprise Culture + Smart Zones

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Distressed Cities

Scenario 3

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CEDP ALERT

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Action

• Invest in human resources and education at all levels

• Develop and sustain an enterprise culture of innovation and entrepreneurship

• Develop transition programs & incentives to address local job dislocations & new job opportunities

• Insist on leveling the playing fields at outsourcing locations abroad as those economies prosper, i.e., wages, environmental & labor regulations, etc.

• In the end, it boils down to creativity & competitive advantage, a diversified local economy and flexibility and adaptability !!

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Action

• When You Leave Today:• Human Resources & Human Capital• Development of an Enterprise

Culture• Private-Public Partnerships of

Stakeholders: Leadership, Vision, Champion(s)

• Change Mindsets & Governance of Leaders & Planners: Embed Behavior

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www.smartmichigan.org

www.electronicspace.org

Kenneth E. Corey and Mark I. Wilson

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NEXT WAVE PRODUCTIVITY GROWTH

Globalization (jobs being done abroad) of IT software & services (rather than emphasis on hardware) = more cost-effective & superior services; lower prices = greater use of IT & transformation throughout the economy will propel US toward 2nd wave of faster productivity growth = greater demand for IT-related jobs spread throughout the economy

Sufficient skilled workers at home can retain & attract superior jobs

Early IT adopters deepen IT investment & transformation

Extend IT investment & transformation to economic sectors that did not participate in the productivity growth of the 1990s, i.e., health services, construction & SMEs

Interdependence of these factors & dynamics should not be broken by protectionism & insufficient skilled workers at home