The price of intellect in the knowledge economy

1. MYKOLO ROMERIO UNIVERSITETAS EUROPOS SĄJUNGA Europos socialinis fondas The price of intellect in the knowledge economy Dr Lynn Martin Director, Entrepreneurship and Innovation Lynn.martin@uce.ac.uk  University of Central England, Galton, Perry Barr, Birmingham, B42 2SU, United Kingdom

2. Who am I? • My perspective and background • Development of work on innovation policy and practice • Knowledge economy issues related to Asia and Europe • Innovation in action – working with business • UK contexts • The Knowledge Economy has been a feature of UK policy since 1996, with earlier refers to related issues • the UK is the largest market in Europe for online business information, with a 38.9% share. • Knowledge based industries employ more people in Sweden (54%), the UK (51%) than the USA (38%) • Significant differences in integration behavior of Anglo-American and European corporates, the UK groups are much closer to the US than to continental Europe groups, integrating research across categories;

3. Home to 9% total UK population; MIxture of rural and urban areas Birmingham - highly diverse population. Birthplace of industrial revolution – now 18% of all jobs in manufacturing, especially innovation based knowledge intensive makes 50% of the UK's jewellery; 60 % of all media activity- 60% of craft firms, 40% of literature / drama West Midlands

4. University of Central England • Characteristics • Strong university-industry linkage – the Knowledge Exchange • Strong international student base especially from Asia • 30,000 students; over 300 courses covering a wide range of subject areas in 7 faculties • Birmingham Conservatoire • Birmingham Institute of Art & Design, BIAD • Birmingham School Of Acting • Faculty of Education • Faculty of Health • Faculty of Law, Humanities, Development & Society • School of Business and Computing • Technology Innovation Centre

5. Paper and presentation • Wide topic / Key themes? • Perspectives, social construction, assumptions • Historical background • “Definitions” • Knowledge Economy and Knowledge Worker • Workplace implications • Changes in workplace practice • Psychological contracts • Case studies • Lithuania and the Knowledge economy

6. Social construction • What is social construction? • Views of the world • How does it relate to the knowledge economy? • Enterprise and self efficacy • Innovation and invention • Intention and aspiration

7. Assumptions • That knowledge has replaced other assets, land, capital and physical resources as a source of competitive advantage • That knowledge gaps impede national / organisational economic advantage • That knowledge implies intellect plus technology, e.g., knowledge = applied technology • That at the heart of the development of the knowledge economy is continuing innovation • That innovation will result in a successful economy, i.e., increased wealth, employment generation, social equality • That working practices will change due to the rise of the knowledge economy, with more temporary jobs for highly skills knowledge workers, with more telecommuting

8. What is the knowledge economy? • “what you get when organisations bring together powerful computers and well-educated minds to create wealth. .. firms in the knowledge economy compete on their ability to exploit scientific, technical and creative knowledge bases and networks” (Workplace Foundation, 2006) • Knowledge-based industries are defined as high to medium tech manufacturing (e.g. pharmaceuticals, aerospace, electrical engineering); financial and business services; telecommunications; and education and health (OECD, 1999) • Given the pace of globalisation and the inter-connectedness of global networks and markets, those without a knowledge economy will be left behind. Where knowledge is a key component of manufacturing and services, then the economy will grow; without knowledge having this role, the economy will falter in this new global marketplace (Lithuania, UNECE 2003)

9. Knowledge gaps • National drive to meet knowledge gaps • Internationally • Regionally • Socio-economic impacts • Impacts of perceived knowledge gaps include drive to support education, lifelong learning, investment in R & D, development of new technologies – the Lisbon agenda

10. The Lisbon agenda 2000The Lisbon agenda • "the most competitive and dynamic knowledge-driven economy by 2010.. 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". 20 m new jobs 2005 Community Lisbon Programme • To modernize our economy - securing our unique social model in the face of increasingly global markets, technological change, environmental pressures, and an ageing population meeting present needs without compromising future generations. The “policy measures fall under 3 main areas: • Knowledge and innovation for growth, • Making Europe a more attractive place to invest and work, • Creating more and better jobs

11. The Lisbon agenda • Historical contexts • New pressures • Impacts internationally • Lifelong learning and the Lisbon agenda • The pressure to innovate

12. “Definitions” Of the knowledge economy Of knowledge workers

13. Characterising the knowledge economy • Advances in scientific and technical knowledge enable an ICT revolution, plus the engineering of materials at the molecular level, and new life forms via biotechnology. • Rapid reduction in transportation and telecommunications costs • Integration of previously disparate economies via ICts, trade etc. • Digitization and informatization reduce transaction costs and increase productivity. • Development of a service-based economy, pervasive activities needing intellectual content • Increased emphasis on HE and life-long learning to use the rapidly expanding knowledge base. • Massive investments in R & D, training, education, software, branding, marketing, logistics, and similar services. • Intensified competition between enterprises and nations via new product design, marketing methods, and organizational forms. • Continual restructuring of economies to cope with constant change.

14. Knowledge workers- who are they? • Would you recognise one if you saw one? • Knowledge workers work in specific sectors/ knowledge workers have particular capabilities, e.g., a knowledge worker has the capacity to • act autonomously and reflectively • to use tools effectively and interactively • to join and function in socially heterogeneous groups (OECD, 2003)

15. How does intellect relate to knowledge economy issues? • What is intellect? • Higher education, connectedness, reflexivity, opportunity recognition, knowledge • Knowledge v information • Tacit v explicit (Nonaka and Taguechi) • Contexts in knowledge, collective v individualistic • Intangible assets • Patents, • trademarks, • recorded and unrecorded design

16. Valuing intellectual assets • Statutes and regs • WTO, WIPO etc • IAS ref IAs 38 • Valuing a knowledge worker • Knowledge • Context and competition • International contrasts • India and China • US, Nordic, Japan

17. Historical perspectives How has the Knowledge Economy concept developed?

18. The KE Concept • Historical contexts • The industrial revolution of the 19th century and the scientific revolution of the 20th century supported the rise of the knowledge-based economy. • 1880s - 1960s, a European middle class emerged based on knowledge embedded in professional functions in industrial society, e.g., engineers, chemists, doctors and teachers. • In this type of knowledge society professional status was based on learning, training and the recognition and accreditation of expertise (Darenty, 2003; Collins, 1979). • knowledge was held within a protected group and performed useful functions.

19.   Post-industrial society in the 1960s and 1970s • 1960s-80s; shift in working practice from manufacturing to services ; ‘New Class’ emerged, broader than the earlier professional and including all parties in society, transformed by developments in ICTs during 1990s. • Knowledge – and hence the knowledge society - transcends national boundaries and hence represents a global phenomenon (Castells, 1996). • A new kind of politics increasingly about the risks from science and technology, contemporary society is more and more organised around democratically shaped kinds of knowledge cultures” (Darenty, 2003, citing Beck, 1992; Giddens, 1994). • Knowledge is central to the social functioning and fabric society (Nowotny et al, 2001).

20. Post-modern perspectives on the knowledge society • emphasises context in the expression of meaning. Hence knowledge without context is meaningless; interpretation and individual “world view” supply meaning and value to knowledge. • Darenty also suggests that this ideology is countered by neo-liberalism and has led to the evolution of higher education as McUniversity”. • While neo-liberalism seeks to reconstruct society in the image of a political doctrine, higher education has been restructured to meet the needs of efficiency and control through accountability. • “Where postmodernism rejects the idea of society for a notion of culture, neo-liberalism rejects society for the ubiquity of the market”. -major impacts on higher education.

21. Higher education and the knowledge economy • In Mrs. Thatcher’s words, ‘there is no such thing as society’, only markets and individual consumers (Guardian, 1985). • In responding to this, universities have developed new bureaucracies that have reduced individual academic autonomy to enable the mass production of higher education (Parker & Jary, 1995). • The results of this are seen in higher student numbers, rationalistic approaches to management, increased centralization, with efficiency and accountability as watchwords • Oxford University • current changes to introduce managerially • what are universities for?

22. Working practices Anticipated and “reality”

23. Working practices • Reduction of those in permanent long term employment relationships • Increase in home/teleworking (Sharkie 2005) • Employees move from relational to transactional psychological contracts • Psychological contracts =non legal part of work relationship based on implied promises, and their effects on mutual reciprocity

24. Psychological contract • Tacit and implicit factors impact on the formal agreement, i.e., the employer and employee expectations of the employment relationship (Cornelius, 2001). • Based on individual views of the world, informed by previous experience and by current perceptions; hence people in the same roles may have different psychological contracts (Rousseau, 2001a). This is further compounded by other factors such as gender, age, lifestyle etc (Guest and Conway, 1998). • Relational contracts based on trust, loyalty, job security and long-term relationships • Transactional contracts based on instrumental constructs, long hours or extra work are exchanged for high pay and for training and development to aid their further employability elsewhere (Smithson and Lewis, 2006: 71).

25. Counter views • Work changes Anticipated • Increased home working, flexibility and job tenure, “gold collars” • Work practices reported • As least 92 per cent with permanent employment contracts in 2000, up from 88 per cent in 1992. • 5.5 per cent on a temporary work contract of less than twelve months in 2000, compared with 7.2 per cent in 1992. • Proportion of employees working on fixed term contracts (i.e,1-3 years) down to 2.8 per cent from 5 per cent in 1992. • The permanent job remains very much the overwhelming UK norm across occupational categories. (Taylor 2002: 12) • More people travel from home to a place of work, not home/ teleworking • Biotechnology fails to make money (Harvard Business Review, 2006)

26. Cases to illustrate KE concepts Bizbrother Advantage Creative Individual firms

27. Case study – Biz Brother Purpose – to engage those not connecting with enterprise form different societal groups Story board – 4 characters in the Enterprise House, all competing as in Big Brother, with Bizbrother voice etc Tasks – find Role models, finance as tasks Happy ending – all win! Screened on TVs in Bizcom events and in faculties, followed up online IPR – characters and story LM/UCE; context Endermol, Netherlands

28. Case study – Advantage Creative • Purpose of the fund / Reasons for its existence • information; asymmetry and moral hazard • Impacts on the creative sector • 10m for equity gaps in company start up or growth • Typical company, Heath IT application • Assets based on intellectual capacity of owner and technological expertise and on new technology being developed; no physical assets • No track record and idea hard for lenders to understand • £250,000 initial loan ROI 45% in 18 months

29. Small firm examples • Hannah Reynolds – Mischievous Marketing • 6 years running web design business, now runs company designing and carrying out marketing strategy for middle sized firms • Deborah Leary – Forensic Pathways • 5 years as CSI equipment firm, now developing iT based tools for crime agencies to aid detection, managing knowledge

30. Case study Lithuania • Prospects for the Knowledge economy • Policy emphases – national and EU • Potential developments • Issues • re IT and innovation • Re enterprise • How is the intellect related to KE devt?

31. Lithuania KE perspectives

32. Lithuania – implementing the knowledge-based economy • “a quick integration of the enormous intellectual resources of economies in transition into the European intellectual pool, stimulating the development of the former Soviet countries” (UNECE, 2003). • Priority sectors – biotechnology, pharmaceuticals; ICTs, laser technologies; and electronic components and mechatronics. • Targets • increase GDP by 2-2.5 times • to reach 50% of the average level EU GDP per capita by 2015 • increase the labour market by 10%. • Education a key component, i.e, improvements in systems and in professional skills and re-training, supported by measures for IT and trade. • The need to boost trade in intellectual products and services, both internally and externally, making them priorities in the State investment program.

33. Lithuania – KE trends • Fundamental shift from traditional industries but some firms with core competitive strengths, rapid growth and increased exports, e.g., wood processing and furniture making; transport sector (services in the W-E, N-S directions); food manufacture (dairy / meat products); and construction. • In 2001, ICT market, the largest of Baltic States, valued at 806 Eu m, up from 723 Eur m in 2000, a growth of 11.5 %. Lithuanian ICT market grew by 11.5% in 2001 (European IT Observatory 2002), or 30% (INFOBALT) • Despite positive GDP growth and strong export performance, employment stagnant, 1995/ 2000 • “jobless growth” - typical of most transition economies in Central and Eastern Europe. Due to productivity improvements are associated with intensive restructuring. • Higher - Public spending on education, primary and secondary education enrolments, adult literacy • Lower employment, maths and science scores for 8th graders lower, tertiary enrolment, availability of management training, and adult continuing education

34. World Bank studies - Lithuania

36. Final comments • The knowledge economy is firmly established in the psyche of policymakers as a real concept based on innovation and particular types of “knowledge” • To support the development of a KE, education , technology and application are needed • To be a knowledge worker requires non-technical assets • Intellect remains a key asset in this society – but which type of intellect?