Darío Quiroga Parra: ICT, knowledge, innovation and productivity

Notes from the PhD Dissertation defence by Darío Quiroga Parra entitled TIC, conocimiento, innovación y productividad: Un análisis empírico comparado sobre las fuentes de la eficiencia en América Latina, países asiáticos y la OCDE (ICT, knowledge innovation and productivity: an empirical compared analysis on the sources of efficiency in Latin America, the Asian countries and the OECD), directed by Joan Torrent Sellens.

Defence of the thesis: ICT, knowledge innovation and productivity: an empirical compared analysis on the sources of efficiency in Latin America, the Asian countries and the OECD.

What is the evidence of new sources of efficiency? What is the stage of the transition towards a knowledge economy?

The literature has already found an evidence of a direct impact of ICTs on the growth of productivity, and an indirect effect of ICTs on productivity and innovation, due to the complementarity between ICTs, organizational practices, innovation and human capital.

The hipotheses are:

  • New sources of co-innovation marginally explain the level of productivity in LatAm.
  • The differential of the growth of productivity between LatAm and Asia and the OECD is due to new sources of efficiency.

A revision was made to find what were all the determinants of productivity and innovation, which were the sources of productivity and, most specifically, which ones were the new sources of productivity and which one s the new sources of co-innovation.

Co-innovation factors were built after adding up components by using factorial analysis. That is, it was found what combinations of variables, combined together, better explained innovation.

Two levels of co-innovation were found:

  • Weak co-innovation: 2 different factors
  • Strong co-innovation: 3 different factors.

Regressions show that co-innovation has appeared since 2000 (regressions made with data from 2000, 2006 and 2008) and is significant, having a positive impact on innovation and productivity. For LatAm, nevertheless, weak co-innovation is more important than for OECD countries, where strong-innovation is the most important one. Coefficients clearly grow from 2000 to 2006, while they tend to stabilization in 2009.

On the other hand, Asian countries boost productivity by adding more capital to their production functions, and not by co-innovation. On the contrary, OECD countries decrease the impact of capital and add more (strong) co-innovation.

On what refers to the differential of the growth of productivity it is important to note that all countries used co-innovation, but in the first stages it had a negative impact on the general growth of the economy, turning positive in the last stage.

Conclusions: Evidence of the existence of new sources of productivity: ICT, human capital, institutions, innovation. In LatAm, though, institutions and Internet are not very important to explain productivity. Thus, the lack of presence of such productivity sources in LatAm explain the difference of growth of productivity between LatAm and OECD countries.

It is important to note that ICTs do not act alone in impacting productivity, but require other factors such as human capital, organization or institutions. Same can be said about the other factors, such as institutions.

Discussion

Jorge Sainz: how can we tell the quality of education by the indicators chosen (only “input”-type of indicators were chosen, and not “output”-type)? Would quality have an impact in the conclusions of this research? Do Caribbean countries behave as the rest of the LatAm region countries or are they different?

Luis Chaparro: in LatAm, most introductions of ICTs have addressed the automation and substitution of old technologies, but not the rethinking of the whole process of production. This is absent in the research, but very much in agreement with the results shown in it.

Josep Coll: beyond human capital, the consideration that countries have to their peoples (trust in people, for instance; management vs. leadership; value sharing, etc.) sure also has an impact on innovation and productivity. Same applies to culture: LatAm, Asia or OECD countries have major cultural differences that surely affect efficiency, productivity, the very concept of growth or welfare, and they should thus be added to the models. And, usually, efficiency gains have a trade-off with other factors, usually rooted in culture: hence, what are these cultural factors that people are willing to trade for higher rates of efficiency?

Darío Quiroga: the inclusion of the quality of education there was an attempt to add it to the model, but it is very difficult to find data on the topic Indeed, there is a dire need for universities in the region to reflect about this topic, and how to measure/quantify it. On a related topic, it is also true that there are many other “qqualitative” differences such as fixed phone lines vs. mobile telephony, or, within mobile telephony, GSM or 3G. A commitment thus, has to be made and accept that the research will have some limitations, especially at the qualitative level. There is hence a need for other qualitative approaches to complete this research.

Notwithstanding, the role of institutions — mainly a qualitative one — is dealt with in the research and a positive impact is found too.

Related with “retinking one’s business” (RE Chaparro) it is true, but can be proxied by looking at the organizational practices, which was included in this research.

Concerning organizational practices — and more related with people in businesses — LatAm is still showing lack of flexibility and of change within businesses, on changing the way workers are managed or addressed to. So, it seems that culture, change of cultural patterns, change of organization architectures do not seem to be following the path of other issues like the adoption of ICTs in institutions. There is a huge gap between investment and usage of ICTs and knowledge economy in Latin America.

Digital Competences (VI). Joan Torrent: Electronic skill-biased technological change (e-SBTC), enterprise and work

Notes from the course Competencias digitales: conocimientos, habilidades y actitudes para la Sociedad Red (Digital competences: Knowledge, skills and attitudes for the Network Society), organized by the CUIMPB, and held in Barcelona, Spain, on July 16th and 17h, 2009. More notes on this event: competencias_digitales_cuimpb_2009.

Electronic skill-biased technological change (e-SBTC), enterprise and work
Joan Torrent

The Knowledge Economy

From the industrial economy to the knowledge economy: Digitization and technological revolution, Globalization, and change in the structures of demand.

Globalization is the last stage of capitalism, understood as the maximization of profit in the market. Capitalism is led by an expanding trend, and always move towards no limits of time or space. And the difference between internationalization and globalization is the time factor.

The fluxes of information and knowledge will be the groundings for development in the next decades: for the first time in History, we’ve got now technology that helps human beings in their mental work, vs. other technologies (steam engine, combustion engine, etc.) that were applied to — and were substites for — manual work. Thus why now knowledge is becoming the booster of wealth, the asset upon which creation of wealth is leveraged. Though knowledge is not new in the production equation, it is new in a sense of magnitude and intensity, leading to changes in productivity, competitiveness, etc.

Implications of this new economic sphere that is the Knowledge Society:

  • Complementary effect: technology has an impact when used to achieve goals in a specific framework, but it has not an impact in itself — though it is the core for economic transformation. But technology biases skills: depending on the technology used, skills will be different: the skills required for working in an assembling line are different from the ones required for working with computers.
  • Synergistic effect: impact on competitiveness, productivity, salaries, etc. But only if there is an effect of co-innovation, of complementarity amongst organizational change, technology and skills.
  • Substitution effect: substitution of manual or mental work by technology
  • Expansion effect or spillovers: network effect or network spillovers among the infrastructure (Technology) with the structure (Economy) and the superstructure (Society). The inclusion of ICTs has affected all aspects of life, changing the Economy and the Society, and not only production itself. The Knowledge Society is a new economic paradigm and a Third Industrial Revolution.

Kinds of knowledge

  • Know what: observable knowledge, non-rival, ability of exclusion, high increasing returns, decreasing marginal utility, lock-in
  • Know why: observable knowledge, non-rival, medium ability of exclusion, high increasing returns, decreasing marginal utility, lock-in, network spillovers
  • Know how: tacit knowledge, low exclusion, medium increasing returns, decreasing marginal utility, low barriers of exit, network spillovers
  • Know who: tacit knowledge, low exclusion, medium increasing returns, decreasing marginal utility, low barriers of exit, network spillovers

The struggle of firms to turn tacit knowledge into observable knowledge will lead to the class war of the XXIst century.

Knowledge economy and enterprise

On a network for enterprises, there’s a process of decentralization, specially of external decentralization: e.g. providers are externalized. In the knowledge economy, also internal decentralization is made possible, leading to the networked enterprise.

And in the case of work, we also witness a transition towards the networked work: ICTs as substitutes of mental skills, production on-demand and differentiated, non-manual knowledge and work, continuous training and corporate training (i.e. There is no knowledge society without a learning society), innovation, flexible salary, self-programmable (i.e. learn how to unlearn), the networked enterprise as the new framework and networked organization, more commitment than the one agreed by contract (i.e. You cannot leave your brain at your workplace), individual relationship with the enterprise, flexibility as value (i.e. flexisecurity), health hazards related with mental illnesses (stress, burnout, mobbing, etc.).

Digital sills

Skills depending on routine vs. non-routine tasks; and depending also on analytical tasks & manual taks.

  • Enterprises that transform the competences base + organization on a flexible way of production and work + and development of work relationships that increase commitment = higher productivity.
  • New practices in human resources management + new organizational systems + intensive use of ICTs = higher productivity.
  • Delegation of responsibilities + lower levels of hierarchy + intensive use of ICTs + human resources management that leads to higher commitment + fostering innovation = higher productivity

Enterprises that are networked are more knowledge intensive, are more innovative, have higher skilled workers, etc. and, in general, are more competitive and have better work conditions.

Workers from the knowledge industry have higher wages; workers that have knowledge-intensive jobs have higher wages; workers that are in the knowledge industry and have knowledge-intensive jobs are the best remunerated.

Conclusion: we have to evolve towards a change in the competences of both workers and enterprises. And accompanied with investment in technology and a deep organizational change.

But the reality shows that most people are unskilled and, ever worst, do not follow continuous training paths, as do their highly skilled peers. Thus, the gap between the unskilled (or less skilled) and the highly skilled increases.

Q&A

Q: how is it that in this days of crisis we don’t see a debate towards knowledge? A: in a situation of crisis (and always) governments have to capitalize the economy, increase its amount of capital. But politically, this is not that easy; there are some economic trends (e.g. the building industry in Spain) that are difficult to stop; and there are some costs in the shift (e.g. several thousands of workers that are going to lose their jobs) that, politically, are unbearable.

More information

Course on Digital Competences (2009)