GLOBELICS Academy 2004: Lisboa - 3 June 2004 CENTER FOR INNOVATION, TECHNOLOGY AND POLICY RESEARCH, IN+ Instituto Superior Técnico, Technical University of Lisbon Technological Change and the challenges for development: building on the experience of less favoured regions Manuel Heitor in collaboration with: Pedro Conceição and Paulo Ferrão

What is this lecture about?... To extend human capability through innovation and competence building, with infrastructures, incentives and institutions fostering social capabilities to comply with distributed knowledge bases and an acelerated rate of technical change

Structure of the Argument 1.The perception today: a diversified context Technical Change: complexity and uncertainty Distributed knowledge base Increasing reliance on market-based mechanisms to promote innovation 2. LFR´s - Beyond Infrastructures? Building evidence: Material Flow accounting Implication 1: Infrastructures and sustainability – which opportunities for innovation? Implication 2: Infrastructures and urban concentration – which routes for innovation? 4. Policy implications: innovation and competence building 3. Knowledge and Learning: understanding knowledge economics

Technical Change: materials STEELS CAST IRON IRON COOPER ALLOY STEELS GLASSY METALS AL-LITHIUM ALLOYS DUAL PHASE STEELS MICROALLOYED STEELS BRONZE SKIN FIBRE GUMS RUBBER LIGHT ALLOYS SUPER ALLOYS TITANIUM ZINCONIUM ETC NEW SUPER ALLOYS DEVELOPMENT SLOW MOSTLY QUALITY CONTROL AND PROCESSING CONDUCTING POLYMERS HIGH TEMPERATURE POLYMERS HIGH MODULUS POLYMERS BAKELITE NYLON WOOD PAPER STONE FLINT POTTERT GLASS CEMENT REFRACTORIES PORTLAND CEMENT FUSED SILICA CERMETS EPOXIES POLYESTERS COMPOSITES POLYMERS METALS CERAMICS POLYMERS COMPOSITES CERAMICS METALS ALLOYS BC5000 BC GOLD CERAMIC COMPOSITES COMPOSITES METAL-MATRIX SURFACE ENGINEERING RELATIVE IMPORTANCE SUPERCONDUCTORS TOUGH ENGINEERING CERAMICS KEVLAR BRICKS (with STRAW) IVORY BC 5000 BC Source: Ashby (1998); IPTS(1999)

Technical Change: perspectives The Convergence: telecommunications and computers... The QUESTION : scope and scale PRODUCTS PRODUCT more technologies to produce each product more products produced from a given technology Source: von Tunzelmann (1999)) TECHNOLOGIES PROCESSES TECHNOLOGY PROCESSES

New reactors Nuclear fusion New energy biomassPhotovoltaic materials Fuel cells Superconductors Supervision of energy processes Robotics Security systems energy Batteries Pacemakers Artificial Heart Recombin. DNA New drugs Enzymatic Synthesis Membranes Biocompatible materials Instrumental analysis of dna sequences biotechnologies Power lasersBio-leaching Biological ore processing New alloys Ceramics and composits Computer based design of new materials materials Photovoltaic applications Biosensors Biochips Semiconductors Superconductors Telematics Automation Computers information technologies energy biotechnologies materials information technologies Emerging interactions... S ource: BIPE from to

The CONTEXT Nathan Rosenberg (2001): “ uncertainty in the realms of both science and technology... have enormously important consequences and a main concern is how organisations and incentives migth be modified to accommodate these uncertainties.” Fonte: OECD(2001), “Social Sciences and Innovation” Chris Freeman (2001): “There is an irreducible uncertainty about future political, economic and market developments....,technological innovations may actually increase it, since they add to the dimensions of general business uncertainty, the dimension of technological uncertainty.” Fonte: SPRU (2001)

The focus: less favoured regions …Why? A specific issue: “ With some notable exceptions, the regional developmment debate in LFRs has been dominated by exogeneous models to such an extent that development tends to be conceived as something that is introduced to, or visited upon, less favoured regions, from external doors… …this kind of regional policy did little or nothing to stimulate localised learning, innovation and indigeneous development within LFRs”, Henderson & Morgan (1999) Low value, Low networking...but high rate of change Peculiar institutional framework......and social dynamics!

The perception today: a diversified context The ‘globalizing learning economy’: –a world characterized by accelerating technical change The challenges: How to manage the risks of being innovative? Which Networks to access to distributed knowledge bases ? How to foster learning as moving along a given trajectory and capability to cope with the emergence of new trajectories? How clusters can remain open to what is going on outside the cluster and how to stimulate radical change when this is necessary? To compete in such a world it is important: to go beyond infrastructures, and access to knowledge… but, it is even more important, to be able to learn as old competences become obsolete, and this requires adequate incentives and a dynamic institutional framework

to go beyond infrastructures: Building evidence: Material Flow accounting

Method: Material Flow Analysis... Why does it matter? Material use leads to environmental damage “One half to three quarters of annual resource inputs to industrial economies are returned to the environment as wastes within a year”, The weight of nations, WRI (2000) International trend: Increase material productivity by a factor of: 2 in global terms 4 in next 20 to 30 years (EUROSTAT, 2001)* 10 in next 30 to 50 years (Factor 10 Club, 1995)** Considered in national policies (e.g. The Netherlands, Austria; Kuhndt and Liedtke, 1998)*** Supported by European Union (factors 4 and 10; Reijnders, 1998)**** * Economy-wide Flow Accounts and Derived Indicators. A Methodological Guide ** Carnoules Declaration *** “Translating a Factor X into Praxis”, in Third ConAccount Meeting: Ecologizing Societal Metabolism **** “The Factor X Debate: Setting Targets for Eco-Efficiency”, J. Industrial Ecology, 2(1)

Aggregation by mass * Resource Flows: The Material Basis of Industrial Economies Material Flows accounting (MFA) Adriaanse et al. (1997)*

DMI vs GDP: the International trend Adapted from Bringezu and Schütz, 2000, Total Material Requirement of the European Union, European Environment Agency, Technical report No 55. ( )

Looking at sustainability: Decomposition of DMI variation Canas, Conceição and Ferrão(2002) Identity between Sustainability and Production (Malaska, 1998) * : Contributions calculation (Chung e Rhee, 2000)**: Logaritmic Mean Divisia Index (LMDI) Method * Moll, 1999, Reducing Societal Metabolism. A Sustainable Development Analysis Sustainable development associated with decreasing material flow ** A Residual-free Decomposition of the Sources of Carbon Dioxide Emissions

Decomposition of DMI variation International disaggregation Employment in construction

A case study: Portuguese DMI Canas, Conceição and Ferrão(2002) Imported DMI: Mineral Products (includes fuels and ores)

Implication 1: Infrastructures and sustainability …which opportunities for innovation?

Testing a relationship: Innovation and sustainability What’s the relevance of the technological innovation? The technological innovation contributes to the economic growth and allows the use of new processes and products that cause less environmental damage or use resources more efficiently. What’s the relevance of this theme ? If the kuznets Hypothesis is valid, then the reduction in environmental damages can be achieved as a consequence of the natural economic development process, that bases largely in the adoption of new production and consumption technologies. The result in terms of public policies is that the stimulus to the innovation can have positive consequences in the reduction of the environmental damages.

The Porter Hypothesis : environmental regulation may lead, in the short term, to additional costs at the firm level, but will give rise, at the long term, to the adoption of new technologies and innovation, leading to growth Static model Dynamic model Innovation and sustainability : the approach... The Environmental Kuznets Hypothesis : Economic growth and environmental degradation are related through an “U” inverted curve How far does this applies to Material Flows ? GDP Conceição, Heitor and Vieira(2002); Canas, Conceição and Ferrão(2003)

Environmental concerns as drivers of innovation % of innovating firms Important Not Relevant Small sizeLarge Size Group Low-technology High-technology Low productivity High productivity High Exports Share Low Exports Share High Exports Share Low Exports Share Testing the “Porter Hypothesis” Data from CIS II ( )- Portugal

IndustryServices Dimension Productivity Exportations Quantitative analysis Qualitative analysis: Environmental concerns stimulate technological innovation Relevant role of networking with Technological Centres and of the industrial associations Effectiveness of the innovation is guaranteed through the involvement of all the value-chain: the need for networking and supply chain management Consumer Pressure = Fundamental Factor to implement SD Testing the “Porter Hypothesis”

Support for inverted “U” EKC: DMI modelling: Aggregated Data Canas, Conceição and Ferrão(2002) Model 1 Model 2 country control country and year control Maximum DMI per capita: $USA e $USA * R 2 =0,27 Random effects * R 2 =0,98 Fixed effects Model results for observed GDP per capita * Statistical significance at 1% level * GDP per capita (1000 $USA prices and PPP )

Environment and Innovation Research Conclusions and Policy Implications Canas, Conceição and Ferrão(2002) 2. LFR´s: the case of the Portuguese Economy ( ): –Increase in material use and intensity : Growth since middle 80’s can be due to infrastructure needs (highways, wastewater treatment facilities, Vasco da Gama Bridge) –Based in non renewable and building sector linked materials 1. Industrialised Economies ( ): –Aggregated data supports Environmental Kuznets Curve –Evidence of GDP per capita relative dematerialization trend Evolution driven by overcome of infrastructure needs External events dependence (e.g. energy crisis) Influence on economic structure of specific sectors ?

Source: Kostof, S. (1991) “ The City Shaped: Urban Patterns and Meanings through History”. Implication 2: Infrastructures and urban concentration …which routes for innovation?

Urban vs. Rural Population

Source: United Nations - Department of Economic and Social Affairs, (2002), “World Urbanization Prospects: The 2001 Revision – Data Tables and Highlights”, Urban population in cities with more than people (Forecast for 2015)

A case study: Portugal

Source: United Nations - Department of Economic and Social Affairs, (2002), “World Urbanization Prospects: The 2001 Revision – Data Tables and Highlights”,

The “Donnut” effect Emerging urbanization trends: Increasing urban population, but reduced urban density Our research hyphotesis: The progressive integration of mobile ICT´s with sustainable mobility equipments and concepts will facilitate improving well being in urban regions if adequate incentives and institutions are adaptatively implemented through a policy learning process

Digital Cities: which rational? Source: Woolman, M. (2000) “Digital Information Graphics”

A case study: Kyoto Digital City Launched by NTT and Kyoto University in 1998 Relaunched as Digital City Kyoto Experimentation Forum in services divided in four categories Information Community Showroom Laboratory Personal Pages GeoLink 3D Kyoto Source: Ishida, T. (2000) “Kyoto Digital City”

A case study: Amsterdam Digital City Electronic space for political discussion and participation 10,000 registered users in the first weeks Quickly transformed The demand for these services declined steadily Most important assets discontinued (content production) or sold (school portal in Source: Besselaar, P. (2000) “Amsterdam Digital City”

Source; OECD (2000). Information Technology Outlook, Paris: OECD. Further evidence: network readiness Source; The Global information Technology Report : Readiness for the Network Society, World Economic Forum LARGE growth rate of ICT expenditure ( 1992 to 1997) A cluster of countries where the effect of increasing GDP on network readiness is less pronounced and other factors, namely at institutional and contextual level, have been shown to particularly influence country’s competitiveness

The “first generation” of digital cities: Some facts about Portugal Bragança 1999 Marinha Grande 1999 Aveiro Bragança 2000

Framework of Analysis

A case study: the region of Alentejo Source:

A system study: Alentejo Digital “Ilities” have not been considered...

But… Communities of Practice have been established Driving factorSample ExperiencesRemarks Scientific Biorede - Biology knowledge network about local biodiversity, molecular biology and estuary ecosystems launched at Aveiro ( ) Website developed and managed by Research Centre Education / Training “Engineering in Portugal”, providing historical data and information for Basic and Secondary Schools, as well as university students ( Learning materials and information exchange between experts, teachers and students; Website managed by Research Centre Public HealthHealth information and communication network of the Bragança Digital City extension services ( oop_puh.html ) oop_puh.html Portable computers and Internet access to foster the communication and information exchange between doctors and patients Managing Public Risks Water quality monitoring and public diffusion system ( ) Raise public awareness about water quality, flooding and other public risks Corporate strategy and competitiveness Marinha Grande local-industry (moulding, plastics and glass) network ( ) Extranet managed by Technological Centre Marinha Grande and Aveiro clearly shows the important mutual relationships that specific project-based communities have on the facilitation of network societies, but also the fact that the implementation of digital cities may significantly improve the efficiency of those communities

Some Conclusions Value-based networks have the potential to make both public administration and markets more effective, which helps promoting learning trajectories for the inclusive development of society, …... but require effective infrastructures, incentives and adequate institutional frameworks; A continuous pubic effort is needed, as also a better understanding of the effectiveness of the mix of public support mechanisms and private incentives for the development of digital cities; In early stage developments, digital cities do require continuous support, together with adequate monitoring and evaluation procedures. Mobilization of the Information Society is one of the most critical factors to be considered in the design, implementation and exploitation of digital cities; Market mechanisms do not necessarily work at the level of the issues associated with digital cities, namely in less favourable zones. They require an effective mix of public support mechanisms that take a relatively long-term perspective Digital cities cannot be promoted independently of an innovation policy fostering capacity and connectivity

Source: Kostof, S. (1991) “ The City Shaped: Urban Patterns and Meanings through History”. A city as a complex system:...which architecure?

Source: Koolhas, R. (2000) “ Mutations”

Emerging Trends of Next Generation Cities… Layer of AnalysisFromToImplications and requirements Infrastructure/access Conspicuous objectsInvisible infrastructure Embedding ICT infrastructures in urban daily life, fostering human-centered systems Fixed accessRoamingCompetitive mobile services and improved regulatory framework for increased individual participation Content/ services One-way distribution of information On-line collaboration and participation Specific knowledge of institutional and local contexts in order to help developing interactive contents Web functionalitiesNetworked ActivitiesNew competences in content and services development, enhancing user activities and networks Human and social Context Technology supplyMobilization of usersMobilizing “change agents” to foster communities of practice, CoP´s, and user involvement StandardsInteroperabilityBuilding individual and social competences through knowledge-based adaptive human centred environments

FROM DIGITAL CITIES TO MOBILE REGIONS Density/Quality of access points Diversity/complexity of information available Descriptive contents Advanced Data services Fixed Narrowband Mobile Broadband Typical/Plain Digital Cities Mobile Regions

From Digital Cities to Mobile Regions Research Question: What critical factors enable a digital city to become a mobile region? What sort of public policies to promote these factors? Dimensions of analysis: Technological: understand what types of technologies need to be in place to support a mobile region and which players are willing/should provide it? Organizational: understand who are/should be the leaders for the transition and under what (business) model should they operate? Behavioral/Geographic: understand how the resident culture shapes the demand for elements of a mobile region (i.e, contents and services) and thus affects its development Others: think about other lines of research that need to be addressed in order to understand all the facets of this process

Technological Change: telecommunications

Technological Change: impact and questions Knowledge Diffusion 2. Knowledge Creation corporate competitiveness depends on innovation capacity globalization has increased market demand on nre products, processes and services Increasing interdisciplinarity and complexity of the knowledge base Significant contribution of technology for scientific development QUESTION: inovation/ adoption of new technologies? QUESTION: Which, and how to develop the scientific base? 3. Knowledge Transfer the need to promote systems of education and training diversified QUESTION: Which education and training systems?

Knowledge diffusion: What can we learnt? Partnerships reflect that: - competence is built over time through interactive learning demanding proximity and there are increasing returns in the production and use of knowledge -competence is localized – some of the knowledge is tacit and cannot easily be disentangled from the cluster - it is embodied in people, organizations and networks -Competence building should be directed to open minds to new trajectories Therefore, the key to understand shared prosperity is a better understanding of learning and knowledge creation in the economy.

Not everything is regional: …the national system of innovation a national technological infrastructure that supports competence building in all kinds of firms a social and legal system that creates trust and interaction among people: good elements in the system is not enough. Focus needs to be on the interaction between the elements. a national action to foster public understanding of science, PUS, fostering “critical minds”... Knowledge diffusion: What can we learnt?

Implication 1: Knowledge Production - an evolving scene... Traditional analysis Emerging questions CONTEXTspecific communityapplication SCOPE disciplinarytransdisciplinary SKILLS homogeneityheterogeneity ORGANIZATION Hierarchical & Static (preserved) Transient & Dynamic (changing) Taxonomy: Gibbons et al (1994) MODE 1MODE 2

Implication 2: Knowledge Production - Distributed Knowledge bases 1. An increasing number of sources of knowledge 2. A broad base of effective interaction: fostering multiple knowledge flows 3. Their dynamics lie in the flows of knowledge, which may not obey to national science policy 4. The number of nodes in the networks accelerates with time, being unaffected by existing institutional structures 5. Knowledge production exhibits heterogeneous, rather than homogeneous, growth Source: Keith Smith (2000)

Promoting Systems of Innovation and Competence Building: The Technology and Innovation gap… Clusters and INSTITUTIONAL NETWORKS to mediate: mediate information exchange knowledge creation capacity for collective action potential for interactive learning efficacy of voice mechanisms

fostering innovation across diversity 1. People 2. Knowledge 3. Ideas Institutions Infrastructures Incentives capacity Connectivity (trade)

Knowledge for inclusive development… Most development programmes stand on their ability to build use knowledge for inclusive development and lack a relational infrastructure for collective action This requires a shift : from state-led or market-driven processes, regardless time, space or milieu to institutional perspective, looking at the quality of institutional networks and looking systematically to infrastructures, Incentives and Institutions

Which Public Policies? supporting existing trends and relationships renewal of existing trends and relationships creating general framework conditions that support the emergence of new clusters and relationships taking specific action to initiate new clusters Keeping the trajectory... …an important and somewhat more difficult role to play o The need to combine protection with competition! o The integration of knowledge institutions vs reliable knowledge …outside what policy makers can do ??

Fostering strategies which promote the integration of policies, but also the diversification of actions: – Funding the quality of supply: knowledge production – Promoting new markets: knowledge diffusion Policy Implications... but also: people: new competences and social capabilities scope: national and/or international requires: time: long-term perspectives context: specific sectorial and/or regional issues value: promoting new market strategies

debate….