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From the Economics of Knowledge to the Learning Economy


... on competitiveness but with negative impact on social cohesion. ... Social cohesion promotes learning but learning based growth undermines social cohesion. ... – PowerPoint PPT presentation

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Title: From the Economics of Knowledge to the Learning Economy

From the Economics of Knowledge to the Learning
  • 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

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
  • 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
  • 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
  • Today the balance has gone too far toward
    protection!! Protecting those who have knowledge

The complex task of knowledge management two
  • 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
  • Buyer uncertainty about the value of information
  • Seller keeps it when selling it
  • Buyer can sell it to others after he has bought
  • Easy to reproduce once it has been produced
  • Policy issues
  • Intellectual property rights to give incentives
    to knowledge producers
  • Public production or subsidies to knowledge

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
  • 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
  • Access to skills through hiring, through mergers
    and take-overs 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
Taxonomy for knowledge (Lundvall and Johnson 1994)
  • Individual competence
  • 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
  • Know WhatShared information - data bases
  • Know WhyShared models of interpretation
    (including company stories)
  • Know HowShared routines
  • Know WhoShared networks

Information technology and its impact on the
different kinds of knowledge
  • Know-what in data bases - limits of search
  • 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
  • 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
  • Tacit by nature
  • Tacit for economic reasons - too costly to codify
  • Explicit and codified knowledge
  • How much of the knowledge package can be
  • 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
  • Codification of know-how is always incomplete -
    lack of distinction between more or less complete
  • Codification as an economically determined
    activity - a crucial element of knowledge

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

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
  • 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
  • Intensified competition selects firms that are
    rapid learners and firms select rapid learners as
  • 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)

Social cohesion is especially important for
DUI-mode of learning. Less important for STI-mode.
Social cohesion
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
  • 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
  • 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
  • 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
  • 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
  • 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
  • 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)
  • 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 RD STI-learning
  • Learning in practise DUI-learning
  • 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
  • STIScience-Technology-Innovation mode is
    characterised by science-approach
    formalisation, explicitation and codification
    knowledge policy as science policy knowledge
    management as ICT-based knowledge-sharing.
  • DUILearning 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
  • 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 RD 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 Low learning
 -share Odds ratios P-value 19.1 5.064 lt.0001 26.7 2.218 0.002 11.7 2.355 .0051 42.5 1.000
Operational dimensions of the learning
  1. Cross occupational working groups
  2. Integration of functions
  3. Softened demarcations
  4. Delegation of responsibility
  5. Self directed teams 
  6. Quality circles/groups
  7. Systems for collection of employee proposals
  8. Education activities tailored to the firm
  9. Long term educational planning 
  10. Wages based on qualifications and functions
  11. Wages based on results
  12. Closer cooperation with customers
  13. Closer cooperation with subcontractors
  14. Closer cooperation with universities and
    technological institutes

A normal distribution of the 2000 firms over the
scale from 0-14
Logistic regression probability for prod.
innov. compared to benchmark
Variables Effect
Highly developed 5,18
Medium developed 2,20
Manufacturing 2,35
Construction - 0,69
Business services 2,27
100 and more 1,61
Danish group - 0,76
Single firm - 0,58
Employment 1992-97 and product and innovations
1993-95 (index 1992100)
Nov. 92 Nov. 94 Nov. 97
P/S Innovative 92.764100 103,6 105,5
No P/S Innovative 42.368100 102,5 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