GLOBELICS Academy 2004: Lisboa - 3 June 2004

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 collaborationwith: Pedro Conceição and Paulo Ferrão CENTER FOR INNOVATION, TECHNOLOGY AND POLICY RESEARCH, IN+ Instituto Superior Técnico, Technical University of Lisbon http://in3.dem.ist.utl.pt

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) 1800 1960 10 000 BC 5000 BC 0 1000 1500 1900 1940 1980 1990 2000 2010 2020 GOLD COOPER METALS METALS BRONZE GLASSY METALS AL-LITHIUM ALLOYS DUAL PHASE STEELS MICROALLOYED STEELS IRON NEW SUPER ALLOYS DEVELOPMENT SLOW MOSTLY QUALITY CONTROL AND PROCESSING POLYMERS CAST IRON SKIN FIBRE GUMS STEELS ALLOY IVORY STEELS COMPOSITES RELATIVE IMPORTANCE SURFACE ENGINEERING LIGHT ALLOYS POLYMERS BRICKS (with STRAW) RUBBER WOOD SUPER ALLOYS CONDUCTING POLYMERS PAPER HIGH TEMPERATURE POLYMERS TITANIUM ZINCONIUM ETC STONE ALLOYS COMPOSITES FLINT HIGH MODULUS POLYMERS BAKELITE POTTERT CERAMIC COMPOSITES GLASS EPOXIES METAL-MATRIX NYLON CEMENT COMPOSITES POLYESTERS CERAMICS CERAMICS KEVLAR REFRACTORIES SUPERCONDUCTORS PORTLAND CEMENT TOUGH ENGINEERING CERAMICS FUSED SILICA CERMETS 10000 BC 0 1000 1500 1800 1900 1940 1960 1980 1990 2000 2010 2020 5000 BC

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

6. information technologies materials biotechnologies energy information technologies Telematics Automation Computers Semiconductors Superconductors Biosensors Biochips Photovoltaic applications materials Computer based design of new materials New alloys Ceramics and composits Bio-leaching Biological ore processing Power lasers biotechnologies Instrumental analysis of dna sequences Membranes Biocompatible materials Recombin. DNA New drugs Enzymatic Synthesis Batteries Pacemakers Artificial Heart energy Supervision of energy processes Robotics Security systems Photovoltaic materials Fuel cells Superconductors New energy biomass New reactors Nuclear fusion Emerging interactions...Source: BIPE 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! • “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) A specific issue:

9. The ‘globalizing learning economy’: a world characterized by accelerating technical change The perception today: a diversified context • 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? • WhichNetworks 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. 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) Method: Material Flow Analysis... Why does it matter? • 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. Aggregation by mass * Resource Flows: The Material Basis of Industrial Economies Material Flows accounting (MFA)Adriaanse et al. (1997)*

13. Adapted from Bringezu and Schütz, 2000, Total Material Requirement of the European Union, European Environment Agency, Technical report No 55. DMI vs GDP: the International trend (1988-1997)

14. Identity between Sustainability and Production (Malaska, 1998)*: Contributions calculation (Chung e Rhee, 2000)**: Logaritmic Mean Divisia Index (LMDI) Method Looking at sustainability:Decomposition of DMI variationCanas, Conceição and Ferrão(2002) 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 variationInternational disaggregation Employment in construction

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

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

18. What’s the relevance of the technological innovation? The technological innovation contributes to the economicgrowth 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. Testing a relationship:Innovation and sustainability

19. 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 Innovation and sustainability : the approach... Conceição, Heitor and Vieira(2002); Canas, Conceição and Ferrão(2003) Dynamic model Static 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” Environmental concerns as drivers of innovation Low-technology Large Size Low productivity Important High productivity High Exports Share High Exports Share Small size High-technology Not Relevant Low productivity High productivity Low Exports Share Low Exports Share % of innovating firms Data from CIS II (1995-1997)- Portugal Group

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 Industry Services - + Dimension + - Productivity + - Exportations

22. Support for inverted “U” EKC: DMI modelling: Aggregated DataCanas, Conceição and Ferrão(2002)  Model results for observed GDP per capita country control * * Model 1 * * Model 2 country and year control GDP per capita (1000 $USA - 1990 prices and PPP ) Maximum DMI per capita: 21940 $USA e 22293 $USA * R2=0,27 Random effects * R2=0,98 Fixed effects * Statistical significance at 1% level

23. 2. LFR´s: the case of the Portuguese Economy (1960-1998): 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 Environment and InnovationResearch Conclusions and Policy ImplicationsCanas, Conceição and Ferrão(2002) • 1. Industrialised Economies (1960-1998): • 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 ?

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”, http://www.un.org/esa/population/publications/wup2001/wup2001dh.pdf

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”, http://www.un.org/esa/population/publications/wup2001/wup2001dh.pdf

29. Emerging urbanization trends: Increasing urban population, but reduced urban density The “Donnut” effect 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. 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. Source; The Global information Technology Report 2002-2003: Readiness for the Network Society, World Economic Forum Source; OECD (2000). Information Technology Outlook, Paris: OECD. Further evidence: network readiness • 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 Bragança 2000 Aveiro 1998... Bragança 1999 Marinha Grande 1999

35. Framework of Analysis

36. A case study: the region of Alentejo Source: http://www.alentejodigital.pt/

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

38. But…Communities of Practice have been established 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. 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 Some Conclusions

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…

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

45. 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 From Digital Cities to Mobile Regions

46. Technological Change: telecommunications

47. Technological Change: impact and questions ... 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. 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. Knowledge diffusion:What can we learnt?

49. 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? Not everything is regional:…the national system of innovation

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