1. GLOBELICS Academy 2004: Lisboa - 3 June 2004
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
CENTER FOR INNOVATION, TECHNOLOGY AND POLICY RESEARCH, IN+
Instituto Superior Técnico, Technical University of Lisbon

2. 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

3. Structure of the Argument
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?
3. Knowledge and Learning: understanding knowledge economics
4. Policy implications: innovation and competence building

4. Technical Change: materials
Source: Ashby (1998); IPTS(1999) BC
5000 BC
1000
1500
1800
1900
1940
1960
1980
1990
2000
2010
2020
GOLD
COOPER
BRONZE
METALS
METALS
IRON
GLASSY METALS
AL-LITHIUM ALLOYS
DUAL PHASE STEELS
MICROALLOYED STEELS
POLYMERS
NEW SUPER ALLOYS
DEVELOPMENT SLOW
MOSTLY QUALITY
CONTROL AND
PROCESSING
CAST IRON
SKIN
FIBRE
GUMS
STEELS
ALLOY
IVORY
STEELS
RELATIVE IMPORTANCE
COMPOSITES
SURFACE
ENGINEERING
LIGHT
ALLOYS
BRICKS (with STRAW)
POLYMERS
RUBBER
WOOD
SUPER ALLOYS
CONDUCTING
POLYMERS
PAPER
HIGH TEMPERATURE
POLYMERS
STONE
TITANIUM
ZINCONIUM
ETC
ALLOYS
FLINT
HIGH MODULUS
POLYMERS
COMPOSITES
BAKELITE
POTTERT
GLASS
CERAMIC COMPOSITES
EPOXIES
NYLON
METAL-MATRIX
CEMENT
POLYESTERS
COMPOSITES
CERAMICS
CERAMICS
REFRACTORIES
KEVLAR
SUPERCONDUCTORS
PORTLAND
CEMENT
SILICA
FUSED
TOUGH ENGINEERING
CERAMICS
CERMETS
10000 BC
1000
1500
1800
1900
1940
1960
1980
1990
2000
2010
2020
5000 BC

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

6. Emerging interactions... Source: BIPE
New reactors
Nuclear fusion
New energy biomass
Photovoltaic 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 lasers
Bio-leaching
Biological ore processing
New alloys
Ceramics and composits
Computer based design of new materials
materials
Photovoltaic applications
Biosensors
Biochips
Semiconductors
Telematics
Automation
Computers
information technologies to
from

7. 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)

8. The focus: less favoured regions …Why?
Low value, Low networking...but high rate of change
Peculiar institutional framework...
...and social dynamics!
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)

9. The perception today: a diversified context
The ‘globalizing learning economy’:
a world characterized by accelerating technical change
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
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?

10. to go beyond infrastructures:
Building evidence: Material Flow accounting

11. 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)

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

13. 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.
( )

14. 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
Sustainable development associated with decreasing material flow
* Moll, 1999, Reducing Societal Metabolism. A Sustainable Development Analysis
** A Residual-free Decomposition of the Sources of Carbon Dioxide Emissions

15. Decomposition of DMI variation International disaggregation
Employment in construction

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

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

18. 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.

19. Innovation and sustainability : the approach...
Conceição, Heitor and Vieira(2002); Canas, Conceição and Ferrão(2003)
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
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

20. Testing the “Porter Hypothesis”
Data from CIS II ( )- Portugal
Environmental concerns as drivers of innovation
% of innovating firms
Important
Not Relevant
Low-technology
High-technology
Small size
Large Size
Low productivity
High productivity
Group
High Exports Share
Low Exports Share
Yellow colour indicates those for which the association seemed clearer.

21. Testing the “Porter Hypothesis”
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
Quantitative analysis
Why this generic model? Evidences from the exploratory data analysis and from bibliography
Why this Initial Model? Distribution of the sample... Higher symmetry of the distribution
Industry
Services - +
Dimension + -
Productivity + -
Exportations

22. DMI modelling: Aggregated Data Canas, Conceição and Ferrão(2002)
Support for inverted “U” EKC:
Model results for observed GDP per capita
country control
* *
Model 1
* *
Model 2
country and year control
GDP per capita (1000 $USA prices and PPP )
Maximum DMI per capita:
21940 $USA e $USA
* R2=0,27
Random effects
* R2=0,98
Fixed effects
* Statistical significance at 1% level

23. Environment and Innovation Research Conclusions and Policy Implications Canas, Conceição and Ferrão(2002)
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 ?
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

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

25. Urban vs. Rural Population

26. Urban population in cities with more than 750000 people (Forecast for 2015)
Source: United Nations - Department of Economic and Social Affairs, (2002), “World Urbanization Prospects: The 2001 Revision – Data Tables and Highlights”,

27. A case study: Portugal

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

29. 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

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

31. A case study: Kyoto Digital City
Launched by NTT and Kyoto University in 1998
Relaunched as Digital City Kyoto Experimentation Forum in 1999
34 services divided in four categories
Information
Community
Showroom
Laboratory
Personal Pages
GeoLink
3D Kyoto
Source: Ishida, T. (2000) “Kyoto Digital City”

32. 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 2000.
Source: Besselaar, P. (2000) “Amsterdam Digital City”

33. Further evidence: network readiness
Source; The Global information Technology Report : Readiness for the Network Society, World Economic Forum
Source; OECD (2000). Information Technology Outlook, Paris: OECD.
Figure 1 - presents the intensity of ICT expenditure in 1997 against the growth rate of this intensity from 1992 to Following recent analysis for knowledge-based industries, the results show that Portugal was the leading OECD country in the growth rate of ICT expenditure from 1992 to 1997, with a growth rate of more than 10%, and mainly accounted for by increases in expenditures in telecommunications (about 9%). Expenditures in IT services and software are particularly low, below 1%, and only Turkey, Greece and Poland have shares of expenditure on IT software and services below the Portuguese value. The growth in this category has been equally dismal, below 2% a year.
In terms of our analysis, we would like to argue that the figure shows large variations associated with countries characterized by small absolute values, exhibiting patterns typical of latecomer industrialization for Portugal. In addition, the results may represent indications of the process through which latecomer countries become engaged in the new techno economic paradigm [11]. Most countries are clustered in the bottom of the figure, with growth rates below 4%. The levels, as indicated by the horizontal distribution of countries, confirm the perception that the US is a leading country. The expenditures on ICT as a percentage of GDP in the US are about 2% above the European average. Individual countries, such as Sweden, outperform the US, but most countries lag behind.
Fig 2 - The main point to note is that the results for Portugal and for most of the OECD countries appears to be dependent from other than the country’s overall wealth (as measured in terms of GDP per capita). Considering the partial log regression plot included in the figure, Portugal is in fact entering the 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.
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

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

35. Framework of Analysis

36. A case study: the region of Alentejo
Source:

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

38. But… Communities of Practice have been established
Driving factor
Sample Experiences
Remarks
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 Health
Health information and communication network of the Bragança Digital City extension services ( )
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

39. 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
The development of case studies in selected Portuguese cities and regions which has been engaged in “digital city” projects is considered
The analysis builds on the concept of social capital, as a relational infrastructure for collective action
Competence building is considered in terms of a dynamic and broad social and economic context associated with digital networks and the analysis suggest the need for continuous public support and monitoring, as well as for the promotion of knowledge integrated communities as drivers of larger communities of users

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

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

43. Emerging Trends of Next Generation Cities…
Layer of Analysis
From To
Implications and requirements
Infrastructure/access
Conspicuous objects
Invisible infrastructure
Embedding ICT infrastructures in urban daily life, fostering human-centered systems
Fixed access
Roaming
Competitive 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 functionalities
Networked Activities
New competences in content and services development, enhancing user activities and networks
Human and social Context
Technology supply
Mobilization of users
Mobilizing “change agents” to foster communities of practice, CoP´s, and user involvement
Standards
Interoperability
Building individual and social competences through knowledge-based adaptive human centred environments

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

45. 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

46. Technological Change:
telecommunications

47. impact and questions ... Technological Change: 1. Knowledge Diffusion
corporate competitiveness depends on innovation capacity
globalization has increased market demand on nre products, processes and services
QUESTION: inovation/ adoption of new technologies?
2. Knowledge Creation
Increasing interdisciplinarity and complexity of the knowledge base
Significant contribution of technology for scientific development
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?

48. 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.

49. Not everything is regional: …the national system of innovation
Knowledge diffusion: What can we learnt?
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”...

50. Implication 1: Knowledge Production - an evolving scene...
Traditional analysis
Emerging questions
CONTEXT
specific community
application
SCOPE
disciplinary
transdisciplinary
SKILLS
homogeneity
heterogeneity
ORGANIZATION
Hierarchical & Static
(preserved)
Transient & Dynamic
(changing)
Taxonomy: Gibbons et al (1994)
MODE 1
MODE 2

51. 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)

52. The Technology and Innovation gap…
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

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

54. 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

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

56. Policy Implications ...
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
requires:
time: long-term perspectives
context: specific sectorial and/or regional issues
value: promoting new market strategies
but also:
people: new competences and social capabilities
scope: national and/or international

57. debate….