1. KNOWLEDGE AND INFORMATION TECHNOLOGY AND URBAN (REGIONAL) DEVELOPMENT Plenary lecture Niksa Alfirevic, PhD Research financially supported by Unity Through Knowledge Fund (http://www.ukf.hr)http://www.ukf.hr

2. Research background Joint research project of Faculty of Economics, University of Split (Croatia) and Dept. of Sociology, University of Klagenfurt (Austria). Financially supported by Unity Through Knowledge - a joint fund, set up by the Croatian Ministry of science, education & sports and the World bank.

3. Knowledge as a common theme End of 20th & beginning of the 21st century abound with the development concepts (economic, social...) based on the notion of knowledge. Themes in economics & business: –Macro-level: issues of knowledge as a production factor, knowledge-based growth, production of knowledge through innovation, inter-sectoral partnerships, networking, etc., efficient knowledge transfer & knowledge spillovers... –Micro-level: issues of knowledge-based competitive advantage (knowledge as a strategic resource), knowledge management (as an attempt to codify & manage the individual 'stock' of knowledge), definition, measurement & management of intellectual capital...

4. Knowledge-based economy (Part I) Is the 'Knowledge Economy' the 'New Economy'? –The neo-liberal perspective points to the service sector, especially to the knowledge-intensive services (high finance, education, R&D, design, marketing, consulting...) as primary drivers of value creation in advanced economies. Actual production and other labour-intensive processes are routinely outsourced to less developed countries. –Coupled with the globalisation processes and advancement of Information & Communication Technologies (ICTs), knowledge produces the 'new economy', supposedly based on knowledge as a fundamental factor of both firm and national competitivenes.

5. "The world is flat" (according to a popular book by T. A. Friedman) and, in such a leveled playfield, knowledge may be the only thing that sets an individual company, region, nation... from its competitors. Figure credit: Wikipedia, entry on 'flat world'

6. Knowledge-based economy (Part II) Events in 2001 (the 'dot.com' crash), as well as the unfolding crisis, bring into question once undisputable ideal of the globally connected marketplace, running smoothly according to the (neo)liberal script. The more 'inward-looking' perspective to knowledge economy might, once again, try to evaluate the extent to which knowledge extends the production frontier of the national economy. In this context, knowledge, produced through innovation, can be considered a fundamental source of economic growth. Even if knowledge is not considered as a factor of competitiveness on global markets, it still represents one of the fundamental drivers of (national) economic growth, according to the contemporary growth theories.

7. Innovation, entrepreneurship & knowledge “Creative destruction is good for economic development”. (Joseph A. Schumpeter, 1883-1950). Neoliberal equillibrium does not matter; capitalism develops in the form of the punctuated equillibrium: stable conditions exist only between two acts of creative destruction, radically innovating technology, products... and other elements of the competitive environment. There is no innovation w/o knowledge. Knowledge matters!

8. Knowledge and EU: The Lisbon agenda (2000) EU striving to become ‘…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’.

9. Knowledge: Public or private good? Knowledge is an abundant resource: it can be rendered obsolete, but does not depreciate, as a 'typical' material resource. Although knowledge can be (re)used, without depleting its inherent value, once it is embodied into, e.g. a software, or a learning system, it starts generating actual costs, related to its embedding into the actual product/service. Therefore, knowledge production is not free and its creator(s) tend to protect their investment into its production. The traditional system of patenting and intellectual property rights (IPR) has once been 'good enough' for this purpose, but the development of the Internet brings its practical viability into question (due to piracy, exchange of copyrighted materials, anauthorized access...). In other words, price of knowledge tends toward 0 (zero) !

10. Knowledge as a (commercial) good/asset Knowledge may be abundant and nonrival, but some of it should be excluded from the common (public) use, if it is to produce economic benefits (profits). However, this will limit the social effects of knowledge, as it becomes impossible for other members of the society to use it cumulatively. While the price of 0 is guarantees socially efficient use of knowledge (by ensuring rapid distribution), it demotivates the knowledge producers and does not guarantee that those will allocate resources required for its production. In addition, knowledge has significant positive externalities, usually defined/interpreted in terms of spillovers.

11. Private vs. public in funding/implementing innovation Source:

12. Knowledge spillovers: Creating a knowledge region/city? For a spillover to occurr, the knowledge producer needs to release it (voluntarily, or unvoluntarily), while the recipient needs to utilize his/her cognitive capacity to absorb the knowledge received, as well as adequate motivation for the transaction (Benefit > Costs). Spillover of explicit knowledge is rather simple, as it can be formally communicated. However, social & cultural similarities facilitate the knowledge transfer greatly. Tacit knowledge can be transferred only among similar actors, within the shared social setting, which makes the informal learning a viable process. There may be a limited (physical) space, such as a region, or a city, for the efficient knowledge transfer!

13. Spatially isolated knowledge spillovers=knowledge regions? Marshall/Arrow/Romer-type spillovers: related to learning in solving similar problems, within the same industry. Such spillovers lead to the exchange of technology, skills... between the locally concentrated producers, which is one of fundamental drivers of cluster development. Jacobs-type spillovers: related to non-competitive learning (such as benchmarking) between different industries, which may help the regions/cities with heterogeneous industry structure. Source: T. Döring, B. Aigner: The Importance of Knowledge for Regional Economic Growth – State of Economic Research and its Application to the Alps-Adriatic Region, forthcoming in: Langer, Pavicic, Alfirevic (Eds.): Knowledge Region: Alps-Adriatic Challenges (Vol. I), Peter Lang.

14. Geography matters... Knowledge may be perceived as borderless, but geography does matter, when it comes to the knowledge production. Once costs of distributing/putting knowledge to use become relatively significant, as well as in case of high social embeddedness of knowledge, distance becomes an issue. In the first case, limited geographical scope of the spillover is justified by the cost issues, while the second case refers to the limited capacity of knowledge recipients to absorb the spillover. Innovation (and its acceptance) may be often geographically limited. Adapted from: Foray, D.: Economics of Knowledge (L’économie de la connaissance), DeCouverte Paris/MIT Boston, 2000/2004.

15. Some cluster-related implications... (Re)considering the idea of clusters/industrial districts, which connect the enterprises (sources of regional innovation) with other relevant sources of the region's resources & social capital (local government, educational institutions, community at large...), in order to create support mechanisms and a wider social context for the pursuit of innovation. Connecting the cluster/district policy to the restrictions designed to boost the national economy in the crisis? Considering the effects to the (national) distribution of income: if there is an inherent advantage of (certain) regions as a basis for knowledge-based industries, this may have a significant effects related to income/wealth distribution.

16. Social aspects of knowledge regions The idea of urban/regional clusters (districts) and study of their competitiveness, popularized by M. E. Porter in 1990s, implies the value of social ties and capital in fostering & using the results of innovation. Coherent & efficient social structures work together with the economic infrastructure, not only to create the knowledge- based economy, but also to develop the knowledge society. The study of postmodernism in sociology has affirmed such a view. The post-modern society is supposed to become fragmented by moving from traditional structures to networks (M. Castells: Networked society). It had been the same with the economy, which concentrated on core competences and outsourced the rest, as well as networked on the global level, in a move from production to knowledge-based services (Bell).

17. From knowledge economy to knowledge/network society Contemporary (post-everything) society revolves around the notion of knowledge: it serves as a source of economic and political power and a (not so new) source of stratification. Knowledge is increasingly codified and informatized: new technologies make it easy to use such knowledge for pursuing innovation and economic growth. Culture, social structures & societies themselves become fragmented, as individuals are empowered to pursue their own (social) objectives and create virtual communities. Does the global crisis change anything?

18. Global crisis vs. knowledge economy/society At the economic level: breakdown of the neoclassical, market-focused model of capitalist economy. More state intervention, more taxes, less uninhibited entrepreneurship and (probably) more trade, capital and other restrictions/controls. At the political level: uncertain future of globalization, as well as multinational organizations, including the EU. At the social level: less trust in the concepts inspired by the post-industrial/post-modern script of the global knowledge society. If we all 'de-globalize', more traditional values and structures could (re)emerge, along with the increased attention to local communities.

19. What about innovation & entrepreneurship? They are, probably, as important as always, but the global crisis might have just put some limitations to theorizing of the global+urban+liberal+information-based+totally-unrestricted- by-tradition socio-economic order, leading, ultimately, to the visions of the SF writers, depicted by popular culture (e.g. Blade Runner, Neuromancer and other early 'cyberpunk' literature, The Matrix...). At the other hand, innovation/entrepreneurship are not 'silver bullets' for all economic & social problems. The global crisis may be a reminder that we might have overemphasized the global on the expense of our regions and local communities. It may be time to, once again, concentrate on local resources and the quality of life in our immediate social surroundings.

20. Thank you ! Questions? Comments? Please direct correspondence to: nalf@nalf.net, nalf@efst.hr nalf@nalf.netnalf@efst.hr