THE KNOWLEDGE ECONOMY

CEDP

THE KNOWLEDGE ECONOMY

Kenneth E. Corey and Mark I. Wilson

Michigan State University March 19, 2004

CEDP

Overview

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

CEDP Awareness

CEDP

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

CEDP

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

CEDP

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

CEDP

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

CEDP

Michigan Planning and Development Regions

CEDP

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)

CEDP

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

CEDP

Internet Use

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

CEDP Layers

CEDP

World Knowledge RegionsBiotech/Pharma Specialization

Tech Clusters: Brennan & Smart ZonesBiosciences Firms Specialization

Tertiary EducationEmpty Areas/New Areas/New SpacesMediated by E-Responsive RegionsMediated by Spatial Distribution of

Distressed Areas

Hierarchy of Multiple Layers

CEDP E-Business

CEDP

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

CEDP

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.

CEDP

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%)

CEDP

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

CEDP Talk!

CEDP

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

CEDP

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

CEDP

Distressed Communities

Geography of Economic Distress+

Geography of E-Responsiveness

Scenario 1

CEDP

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.

CEDP

Spreading the Benefits

Pre-Existing Potential Institutions+

Planned Relationships

Scenario 2

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Human Resources Linkages

Education Institutions + Performance

+Enterprise Culture + Smart Zones

+Distressed Cities

Scenario 3

CEDP ALERT

CEDP

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 !!

CEDP

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

CEDP www.smartmichigan.org

www.electronicspace.org

Kenneth E. Corey and Mark I. Wilson

http://www.smartmichigan.org/

http://www.electronicspace.org/

CEDP

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 economySufficient skilled workers at home can retain & attract superior jobsEarly IT adopters deepen IT investment & transformationExtend IT investment & transformation to economic sectors that did not participate in the productivity growth of the 1990s, i.e., health services, construction & SMEsInterdependence of these factors & dynamics should not be broken by protectionism & insufficient skilled workers at home

THE KNOWLEDGE ECONOMY

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