Chapter 9

The public
policy agenda

Public policy plays an important part in shaping the environment in which individuals and organizations can create wealth and contribute to society’s prosperity. As the knowledge economy takes hold, significant changes are needed in many areas of public policy to stimulate, and not stifle, the right kind of entrepreneurial activity.

The global and pervasive nature of knowledge activities means that national governments can no longer act in isolation on such matters. Before discussing specific aspects of the policy agenda, this chapter considers what factors underpin a successful knowledge economy. Policy areas that need addressing include the global infrastructures for telecommunications, the legal and regulatory environment, and international agreements on electronic commerce. As well as a regulatory role, policymakers must also collaborate in initiatives that stimulate innovation in knowledge based enterprise. Examples are given of pioneering initiatives that are building the foundations for a prosperous knowledge society.

Knowledge for posterity

Knowledge has always underpinned mankind’s prosperity. Scientific and technical knowledge has helped us lead better and longer lives. Management knowledge has helped us to organize resources and produce products and service more efficiently. As we enter the new millennium deeper knowledge about man’s interaction with the natural environment will help us build a sustainable future. The World Bank, whose investment is predominantly targeted at development of poorer countries, chose Knowledge for Development as the title of its 1998–9 World Development Report.¹ Its preface reads:

This year’s World Development Report, the twenty first in this annual series, examines the role of knowledge in advancing economic and social well being. Because knowledge matters, understanding how people and societies acquire and use knowledge - and why they sometimes fail to do so - is essential to improving people’s lives, especially the lives of the poorest among us … by recognising that knowledge is at the core of our development effort, unexpected solutions to seemingly intractable problems will be discovered.

New measures of success

Success in today’s world is frequently measured in financial terms. We measure a country’s prosperity by its GDP. But is this really a meaningful measure in the knowledge economy? Prosperity in the twenty-first century is not about financial wealth. It is about personal well-being and fulfilment, and living in a sustainable environment. A forward thinking country like Sweden has quality of life (QoL) of its citizens as one of its public policy goals.

Two institutions that now examine more deeply the factors behind wealth creation are the World Economic Forum (WEF) of Geneva and IMD (the International Institute for Management Development) of Lausanne. They prepare annual reports that rank national ‘competitiveness’, a country’s ability to generate wealth. A large number of factors are involved - 223 in the case of IMD and 155 for WEF.² Both organizations group them into eight categories that show remarkable similarities (Table 9.1).

Table 9.1 Categories of national competitiveness indicators

World Competitiveness Yearbook (IMD)	Global Competitiveness Report (WEF)
Management	Quality of business management
Domestic economy	Openness to international trade
Science and technology	Quality of technology
People	Labour market flexibility
Government	Role of government budget and regulation
Internationalization	Quality of political/judicial institutions
Infrastructure	Quality of infrastructure
Finance	Development of financial markets

Many of these indicators are intangible and related to knowledge. The importance of knowledge and innovation to competitiveness is recognized by the Massachusetts Technology Forum, a consortium of businesses, government and academia. Its Innovation Index is a set of economic indicators that ‘more clearly identify and better explain the essential ingredients, dynamics and comparative values of the innovation economy’.³ The index comprises thirty-three indicators in three categories - critical inputs, processes and results (Table 9.2).

Table 9.2 The Massachusetts Innovation Index (sample indicators)

Inputs (16 indicators)	Processes (9)	Results (8)
Human resources: population growth education level assessment scores Technology: per capita R&D corporate R&D Investment: venture capital research tax credit use Infrastructure: ISDN availability Internet connectivity classroom Internet access international airline routes	Business innovation: industry value added value of intangible assets Commercialization: licence royalties FDA drug approval rates Entrepreneurship: innovation awards no. of ‘gazelle’ companies initial public offerings (IPOs) Idea generation: patents filed	Job growth Average wages Income distribution Export sales Business climate New industry clusters

Foundations for the future

These approaches give us insights into the key factors behind wealth creation in a knowledge economy (Figure 9.1).

The policy agenda, like those in previous chapters, must integrate technology, economic and social factors. It must cohesively integrate policy at local, national regional and international levels. It must provide a legal and regulatory framework, stimulate initiative, and create suitable infrastructures for innovation and knowledge development.

Figure 9.1 A simplified model of the global knowledge economy

The elements of such an infrastructure are portrayed in the model in Figure 9.2. This has been derived from the work of George Kozmetsky and colleagues at Austin, Texas, a good exemplar of a region whose infrastructures have stimulated innovation and wealth creation.

Kotzmetsky highlights the importance of both technological infrastructure and entrepreneurial networks as key ingredients: ‘The promotion of technology activities requires working links, or relationships, not only among and between individuals, but also among and between a variety of institutions. The more extensive, complex and diverse the webs of relationships, the more likely a region is to accelerate industrial and technological development.’⁴ Based on his own successful experiences, he explains that the networks should include:

Figure 9.2 Elements of a typical innovation infrastructure

Source: Adapted from Kozmetsky, G. (1994). Technology Transfer in a Global Context. Working Paper No. 294-04-01, IC², University of Texas at Austin

• Universities to provide quality of initial and continuing education, as well as research facilities and programmes of benefit to potential entrepreneurs.

• Established and other growing businesses, who can provide links to suppliers and customers, peer support and role models.

• Business support services such as accountants, lawyers, financiers.

• Regional and national government agencies to provide funding and other forms of support.

• A range of individual experts and consultants, social and civic groups.

Many of the US high-technology wealth-creating regions, such as Silicon Valley, Austin, and Route 128 near Boston, can be traced to this diversity of networks.

Technological infrastructure

The Internet today is just the first step towards a universal technology infrastructure. The next five years will see a quantum leap in bandwidth and access speed. Broadband multimedia, cabled into homes and offices, will bring live broadcast quality video and interactive three-dimensional applications. Infrastructure investment is stimulated by the development of services that have widespread business and consumer appeal. Several national governments have recognized their role in stimulating such developments.

The USA’s National Information Infrastructure (NII), was proposed by Al Gore as ‘a seamless web of communications networks, computers, databases and consumer electronics that will put vast amounts of information at users’ fingertips’.⁵ Today this vision has moved on to the Global Information Infrastructure (GII), where electronic commerce will take place on a global scale.⁶ A related initiative is the Next Generation Internet Initiative (NGII) which has funds of $110 million allocated to build a research network that is 1000 times faster than today’s Internet.

The EU’s Advanced Communications Technology and Services (ACTS) programme is concerned with the deployment of advanced communications infrastructures and services aimed at businesses and consumers. Over its lifetime from 1994 to 1999, the work in ACTS has shifted progressively from fundamental research to demonstrator applications, with user trials being a key feature of most projects. Development areas include interactive digital media services, such as telework and teleshopping, high-speed networking using ATM, and the integration of fixed and mobile networks. The EU regards cross-border broadband communications services as ‘an essential infrastructure for competitiveness and the basis for trade, provision of services, production, transport, education and entertainment’.⁷

Perhaps the most ambitious national initiative is that of Singapore.

The examples of the USA, EU and Singapore, show how appropriate public-private partnerships can stimulate progress toward creating highspeed infrastructures and value-added services. One general concern is that access to such services should be both universal and affordable. The problems of taking high-speed networks to remote areas with low population densities may in the end call for public subsidies, although advances in satellite communications may alleviate the problem.

Awareness and education

The knowledge society needs new competencies, in using technology, managing information and in entrepreneurship. Furthermore, the pace of change and future uncertainty means that basic education needs to change in four fundamental ways:

1 A shift from an emphasis on imparting knowledge into one of developing thinking and learning skills.

2 A shift from a one off activity in childhood into lifelong learning.

3 Making IT literacy an evolving skill from an early age.

4 Bringing the world of business into the classroom.

Education systems are often slow to change. Specialists in existing subjects are reluctant to give up curriculum time as pressure grows to add new subjects. While many national governments, such as that of Denmark, have for many years made IT in schools a high priority, the pace of development and the need for equipment and training has often outstripped pubic resources. Active partnership with the private sector and other organizations is crucial. Many education establishments achieve this through closer community involvement, such as providing access to their facilities and hosting collaborative education programmes.

Corporate universities, distance education and virtual learning networks are other examples of collaboration between businesses and education. One example of such collaboration at community level is that of the South Bristol Learning Network (see panel overleaf).

At the national level more needs to be done in co-ordinating such activities and setting the framework for national competence development. As in many other areas, Denmark is taking a lead with its National Council for Competency, created as the nation’s ‘advisory institution for competence development in the knowledge society’. Initiated by a leading socioeconomic think-tank, Strategic Forum, it brings together in a network public institutions, leading Danish companies and local governmental agencies.

Finance for innovation

A third vital infrastructure is that of financing innovation and knowledge-based enterprises. Financial institutions are notoriously fickle in their lending, with wild gyrations according to economic cycles. They also tend to back traditional investments in tangible assets rather than creating the infrastructures for tomorrow’s knowledge businesses.

What is needed are financial networks and mechanisms that make it easier for the genuine wealth-creating knowledge-based businesses to get appropriate levels of finance. NASDAQ, the US-based stock exchange specializing in initial public offerings for high-technology companies, is one example. But a local financial network linked to other infrastructure dimensions fills other needs. Silicon Valley and Austin have vibrant venture capital networks, many of the investors being individual business angels whose wealth has come from their own business ventures. The public sector can stimulate the formation of such networks, but it also has a wider role. It needs to create a favourable climate for this kind of investment, through tax breaks on start-up companies and their investors. It must also minimize the bureaucracy needed to create and run start-up companies. However, in countries like France small companies face bureaucratic burdens not significantly different from a large company, which has a higher disproportionate impact on them.

Legal and regulatory frameworks

The knowledge economy is rapidly developing without the necessary legal and regulatory framework. The pace of legislation usually significantly lags that of technology. Much legislation affecting knowledge industries evolves on a national basis. This leads to wide variations in law in key areas such as intellectual property, personal data privacy and freedom of information. Yet the Internet transcends national boundaries.

A spokesman for the Transatlantic Business Club, an influential group comprising over 100 chief executives from major businesses in Europe and the USA describes the current situation as ‘inadequate’ and ‘a patchwork of laws, and in some cases, contradictory’. They are arguing for a high degree of self-regulation with a minimal, globally harmonized, technological neutral.⁸ An example of such an anomaly is that the US Freedom of Information Act allows UK citizens to access information in US government databases concerning the UK that is not published in the UK. In the USA 150 Internet-related bills were introduced in state and federal legislatures during 1998. For example, there was a proposal in Texas to tax any electronic traffic that passes through the state, even if the server and client are located elsewhere. Taxation anomalies also exist. In many countries, goods purchased over the Internet are free from taxes, yet the same goods bought locally are not.

Table 9.3 Summary of rights and responsibilities for electronic publishing

Rights	Responsibilities
Integrity – accuracy of author’s work maintained	Accuracy – factual and not libellous; integrity is maintained
Identification – of author, publisher and distributor visible to user	Signature – to show origination and publisher
Conditions – terms of use can be imposed and are clear to the user	Terms – specify any special condition of use and reuse
Remuneration – right to establish a price for value each party adds that is also fair to user	Value – quality work worthy of publication whose value is maintained throughout the distribution system
Attribution – acknowledgement of source	Attribution – of sources cited, of author and of publisher
Permissions – requests promptly dealt with	Permission – is sought to incorporate other’s works or to use in ways beyond terms of use
Privacy – rights to monitor usage while respecting individual privacy
Security – to prevent misuse and respect privacy of users

Source: The National Federation of Abstracting and Information Services (1997). The Rights and Responsibilities of Content Creators, Providers and Users: A White Paper, NFAIS.

Intellectual property is another area of knowledge based activity that suffers from lack of harmonization of legislation as new technologies create a legal minefield. The ease with which information can be copied and transmitted means that without some protection, the incentive for producers to create new information may be reduced. However, too much protection may restrict the flow of knowledge and stifle innovation.

A fair balance has to be struck between providers and users. A White Paper by the National Federation of Abstracting and Information Services proposes a set of rights and responsibilities for content creators (authors), providers (publishers, database producers, distributors) and users (Table 9.3).

Knowledge society initiatives

Around the world there are initiatives to stimulate moves towards an information or knowledge society. The EU started on this path in 1993 with a White Paper Growth, Competitiveness, Employment.⁹ This was quickly followed by the Bangemann Report, named after the European Commissioner for Industry, Martin Bangemann, who chaired the group of IT industry leaders that developed it. Anxious to emulate the lead of the USA, their report Europe and the Global Information Society urged action by the EU ‘to put its faith in market mechanisms as the motive power to carry us into the information age’. It called for actions to foster an entrepreneurial spirit, developing a common regulatory approach and warned against public subsidies and protectionism.¹⁰ It sought the development of a high bandwidth of networks and a set of application services, so that a critical mass of users could be achieved and thus stimulate further investment. Ten transnational applications were proposed (see panel on page 253).

As a result many programmes in the EU’s Fourth Framework research programme have supported these developments. But the EU’s view of what they call ‘the information society’ goes beyond technology. Its 1994 policy and action agenda balances services, application and content with social, societal and cultural aspects.¹¹ It envisages a pragmatic bottom-up approach, with the private sector implementing projects, while the Union acts as a catalyst and provides some financial support where necessary. The 1998 updated ‘Rolling Action Plan’ identifies five priorities:¹²

1 Improving the business environment, including promoting the uptake of electronic commerce, especially by SMEs.

2 Investing in the future – starting with classroom education but extending into lifelong learning.

3 Supporting European technology, especially substantial investment at a relatively early stage of market development in key emerging technologies.

4 Putting people at the centre, e.g. improving employment opportunities and quality of life.

5 A focus on the global context, recognizing that Europea must participate in global frameworks.

G7

The G7 group of countries – (Canada, France, the USA, the UK, Germany, Japan and Italy) also has a set of co-operative information society projects. Eleven pilot projects were initiated in 1995 to set the groundwork for ongoing co-operation, and to identify obstacles in creating practical global applications (Table 9.4).¹³

UK national initiatives

The UK offers a good example of a series of initiatives addressing the development of a knowledge society. Its Information Society Initiative (ISI), launched in 1996 aims to stimulate the overall uptake of information systems, through three major programmes:

1 IT for All – making IT accessible and used by the average person; some 2000 access centres are planned where members of the public can see IT in action.

Table 9.4 G7 information society projects (1995-9)

1	Global Inventory of Applications	A one-stop shop for information on 2000 projects, whose visibility will create ‘alliance-building opportunities’.14
2	Global Interoperability of Broadband Networks	19 major applications projects including education and medical networks.
3	Cross Cultural Education and Training: (Tel*Lingua)	An international network for language education connecting teachers, trainers and users.
4	Electronic Libraries: (Bibliotheca Universalis)	Co-operation between national libraries to establish the framework for a global electronic library system.
5	Multimedia Access to World Cultural Heritage	Electronic museums and art galleries.
6	Environment and Natural Resources Management	Agreeing standards for a virtual library of environment and natural resources management information.
7	Global Emergency Management (Gemini)	28 demonstration projects from seven countries covering networks, communications, support functions and specific hazards.
8	Global Healthcare Applications	Projects dealing with cancer, cardiovascular disease etc. that have demonstrated interoperability of medical images and health cards so patients can be treated irrespective of location.
9	Government On-Line	Disseminating information about best practice by governments in providing and promoting on-line services.
10	Global Marketplace for SMEs	Over 30 projects demonstrating various applications and services, resulting in electronic commerce policy development, and a best practice guide.
11	Maritime Information Society: (MARIS)	Links existing systems to create global maritime networks, e.g. for fishing (MARSOURCE), for information on vessel movements (MARTRANS).

2 ISI Programme for Business – especially targeted at small businesses. Projects include support centres and a series of basic but helpful booklets, such as ‘How electronic mail can work for you’.

3 IT for Schools – gives children and teachers access to the Internet.

The UK government sees itself as having a fourfold role:

1 Providing leadership – the creation of a vision of the future; encouraging wider participation.

2 Providing an appropriate regulatory framework that encourages effective competition, and inspires innovation.

3 Raising awareness – among users and suppliers, in public and private sectors, firms and individuals.

4 Acting as an intelligent user – of the Internet, email, videoconferencing and other technologies.

One way of furthering these goals is for the government itself to go online. It has pledged to put more public information on-line and has set a target for 35 per cent of government services to be available on-line by 2002. Wider access to government is planned through computers in libraries and on-line kiosks in public places such as shopping centres and railway stations.

Other initiatives include a National Grid for Learning, connecting schools to the Internet, and a twenty-four hour telephone support line for medical advice staffed by trained nurses. In December 1998 the Department of Trade and Industry published a White Paper Our Competitive Future: Building the Knowledge Driven Economy (at http://www.dti.gov.uk). In it the government commits to ‘build capabilities, catalyze collaboration and promote competition’. Specific programmes include rewarding universities for increasing interaction with business, developing entrepreneurial skills in students and sharing best practice. The White Paper is said to have been heavily influenced by the entrepreneurial climate in the USA and especially in Silicon Valley.

On-line trading and working

Electronic commerce

The potential of electronic commerce has already been outlined in Chapter 4. Realization of this potential, though, depends on collaborative initiatives at local, national and international level. Perhaps the best known local initiative, whose influence has extended globally, is that of CommerceNet, which started in 1994 as a not-for-profit initiative in Silicon Valley with a mission ‘Working Together to Make Electronic Commerce Easy, Trusted and Ubiquitous’.¹⁵

At national level various governments are now setting down principles and policies as a framework for global electronic commerce. In 1997, the US administration set down five principles and made recommendations for international action:

The EU launched its corresponding initiative in mid-1997.¹⁶ While it recognized the US lead in electronic commerce, it noted how Europe could build on some of its unique strengths in content creation, linguistic and cultural diversity, and the European single currency. Specific areas of action include telecommunications deregulation, creating a favourable regulatory framework and promoting a favourable business environment. In May 1998 the EU issued a directive on electronic signatures. Electronic information is accompanied by an encrypted certificate issued by an accredited certification agency that validates the authenticity of the sender. The directive specifies minimum requirements for a signature, for providers and rules on liability. However, implementation is not planned until January 2001.

Comparison of the US and European public positions shows a high level of commonality but some significant differences. The USA is strong on self-regulation, while Europe has a predilection to back up self-regulation with legislative powers. The OECD is behind moves to draw together different national perspectives into a coherent international framework. At a ministerial conference on electronic commerce in Ottawa in October 1998, representatives of its twenty-nine member countries agreed a vision of ‘a borderless world, realizing the potential of global E-commerce’. It issued declarations on privacy, consumer protection and authentication. It agreed a structural, simple and fair tax system with no new discriminatory taxes on electronic commerce and the application of the traditional principle of taxing goods where they are consumed. The agenda will now be developed in small working groups.¹⁷ Whether they will work fast enough to exert significant influence on a market that is evolving so quickly remains to be seen. The pace of technological change means that policy-makers must legislate with a light touch and resist temptation to interfere in markets that are largely supplier and user driven.

Teleworking

Teleworking is mostly stimulated by enterprise and community initiatives. At a national level, efforts are needed to make telework a more natural way of working. Governments can take a lead by demonstrating their own use of telework, and by removing legal barriers, such as anomalies in employment law. The Italian government passed laws in 1998 aimed at stimulating teleworking in public administration by making more flexible patterns of work permissible.

One of the most sustained public programmes has been that of the European Commission who over the last five years has had a number of initiatives to create awareness, conduct studies and promote pilot projects. The projects have included comparative reviews of laws in each country, projects to enable disabled people to gain employment through telework and projects to train SMEs in virtual working. Awareness has improved through a series of telework weeks, taking place each November. Since the first European Telework Week (ETW) in 1995, the scale has grown from thirty to over 300 events, with a corresponding growth in press and media coverage. Typical events are conferences, telecentre open days with videoconference links across countries and the launch of new community networks. In Holland there are national telework prizes culminating with an award ceremony on television. European-wide activities include an annual telework congress, on-line activities and the European Telework Awards, recognizing achievements such as teleworking’s contribution to competitiveness and to sustainability, and the most original teleworking scheme. ETW emphasizes that telework, like electronic commerce, should be an integral strategy for achieving business competitiveness.

Another EU-supported telework initiative is European Telework Development (see page 111). It supports initiatives in many countries based on needs identified from its annual status reports. It works closely with suppliers, government agencies and local agencies. Its website provides comprehensive information about initiatives in twenty-five countries in fifteen languages.

Stimulating innovation

Governments have a long tradition of investing in research and development. However, as was discussed in Chapter 2, this is only the starting point of innovation and wealth creation. Attention needs to shift to R&D exploitation, and the creation of conditions for the complete innovation cycle to work well. This section indicates the types of initiative that are needed.

Updated industrial policies

Many developed Western countries have witnessed the decline of their traditional manufacturing base, such as steel-making, shipbuilding and car-making. Unfortunately industrial policy has often been geared to protecting and creating jobs in manufacturing. But this is a futile short-term expedient. Even high-tech computer factories in Ireland and semiconductor plants in north-east England have closed, some within ten years of opening.

In the global knowledge economy, countries must develop their own niches based on specialized knowledge. Even in a wired world, location does count. London hosts more international banks than any other city. High-speed networks are complemented by strong personal networks and a wide range of supporting service companies. Switzerland supports a unique niche in precision engineering, and Israel in defence-related software.

Industrial policy must therefore shift to creating knowledge hubs, and embedding the capabilities into local infrastructures, to minimize the possibility of wealth migration.

European framework programmes

The EU’s five-year research and technology framework programmes have already been mentioned. From broad policy objectives, specific programmes and ‘calls for proposal’ are developed, against which interested consortia make bids for projects of their choosing. Many consortia contain a mix of university researchers and commercial companies, thus encouraging transfer of research knowledge into commercial activity, although commercialization as such is beyond the scope of EU funding. One of Europe’s successes has undoubtedly been its leadership in mobile communications. Manufacturers have benefited from the strong stance taken on adopting the pan-European GSM standard. Companies such as Ericsson, Siemens and Nokia have been active participants in framework projects.

The Fifth Framework programme starts in 1999 with funding of 14 billion ECU, and clearly shifts the emphasis to ‘research at the service of the citizen and European competitiveness in a global framework’. Projects will be judged according to how well they meet economic and social objectives. Activities within the programme are grouped into three themes:

• unlocking the resources of the living world and the ecosystems

• creating a user-friendly information society

• promoting competitive and sustainable growth.

Typical projects will address services for the citizen, new ways of working, electronic commerce, multimedia content and tools. A worthwhile feature of the latest programme is that it specifically encourages multidisciplinary activities, and puts socioeconomic considerations on a par with technology. However, critics still see such programmes as not attracting a sufficient number of entrepreneurial SMEs, the very companies who are at the forefront of innovation. Another EU programme, the innovation programme, may be more successful at this.

The EU innovation programme

Europe’s innovation paradox is that it invests considerably in R&D, without commensurate returns. Whereas the USA and Japan have a trade surplus in high-technology goods of $150 billion, Europe’s deficit is $25 billion. Patents, too, are much lower than would be expected from R&D spend. As a result the EU, under the direction of Commissioner Edith Cresson, launched its innovation programme in 1997.¹⁸

While the Commission notes that action for innovation ‘is in the first instance the responsibility of citizens, of industry and of national, regional and local authorities’, it identifies three central areas for action:

1 Fostering an innovation culture, through education, mobility for researchers, and propagation of best management practice.

2 Establishing a framework conducive for innovation, by simplifying the European patent system, access to a new finance and reducing the formalities for business start-ups.

3 Linking research more closely to innovation, by encouraging more intense co-operation between public, and private sectors, through campus companies, spin-offs etc.

By mid-1998 300 projects were under way, of which seventy had reached implementation. Examples include the marketing of a silent exhaust pipe and the development of a bio-monitoring instrument for assessing lake-water quality. Various innovation tools have also been developed, such as GOAL (Goal Oriented Project Planning) and BETTI (a benchmarking tool). In finance, EASDAQ, a European stock exchange backed by sixty financial institutions and modelled on NASDAQ, listed its first companies in November 1996.

While the programme is to be welcomed for some good plans and the closer involvement between technologists and users, it remains to be seen how much of an impact it will really have. In particular, will it create a truly entrepreneurial mindset amongst politicians and European businesses? The programme uses language strongly rooted in Industrial Age logic: ‘technology transfer’, ‘benchmarking’, ‘best practices’, etc. It needs to shift focus:

• from technology transfer to the innovation system as a whole

• from information society to the knowledge economy

• from the language of competitiveness to the practice of collaboration

• from training approaches to learning networks.

Innovation needs knowledge networks that cross sector boundaries. It needs an environment that motivates individuals to innovate, and where start-up entrepreneurs can access finance and incubate new businesses. Let’s look at two types of programme that illustrate the above shifts and which more policy-makers should emulate.

Technopoles and incubators

Silicon Valley is perhaps the best known example of an innovation region. What supports innovative and entrepreneurial activities is a local infrastructure that draws together education, finance and business networks. It is not uncommon to discuss an idea with a venture capitalist at breakfast, create a new company by lunchtime, and have venture capital secured later the same day. Silicon Valley is an example of a technopole, a high-technology region which creates opportunities through collaboration between companies, research centres and technological support agencies. Another example is that of the Austin area of Texas (see page 262).

Business networks

Collaborative business networks are another source of innovation and economic development. One of the best examples is that of Denmark’s Business Networks. What started as a government initiative in 1988, rapidly evolved so that by the mid-1990s more than 25 000 of Denmark’s small and mid-size firms were active in over 1000 networks. A key feature is a network centre that stimulates the formation of an individual network. These centres provide various co-ordinating activities, such as providing a network broker who brings together firms with complementary competencies. They also offer development and marketing services, and help networks and member firms gain access to funding. What has also been found to be important is the value of a broker support infrastructure. It is also recognized that there needs to be better sharing of best practice amongst brokers, and more performance monitoring and quality control. Since the introduction of these networks, Denmark’s position in comparative league tables of national competitiveness has jumped from low in the tables to fifth position.

The Danish model has also been taken, with some success, elsewhere. The Avon Network Centre in south-west England is one example. It markets and promotes business networking, and provides business advisers and network brokers. Within two years of starting Avon had eight networks in place involving forty enterprises, with twenty potential networks involving a further 100.

Actors and roles

The largest impediment to progress towards creating a prosperous knowledge economy is the networking between various actors. Inadequate knowledge results in lack of mutual understanding and in inadequate pooling of the competencies needed to innovate. There are several groups of actors who should be collaborating much more.

The contribution of enterprise

The primary focus of commercial organizations is generally considered to be wealth creation for their shareholders. However, organizations of all types have great reservoirs of knowledge that should be made more widely available for societal benefits. Enterprises should pool their knowledge through partnership with other stakeholders through:

• Contributing to education – encouraging employees to spend time helping local schools; contributing expertise to new curriculum materials; providing work experience opportunities; participating in policy forums to shape the future of education.

• Community involvement – many companies do not do this until they are of a certain size, or need the help of a community, such as support for locating a new office. However, their inputs are valuable in building community knowledge infrastructures (see below).

• Participating in policy bodies, public agencies and forums – many policy bodies can benefit from professional business input. Two-way benefits are achieved when individuals provide expertise on a regular basis and gain personal development opportunities in return.

• Secondments and exchange – encouraging employees to spend time in government departments, education establishments, and vice versa. This may take the form of a period for exchange, say six months, or regular involvement on a part-time basis.

Many organizations are already doing these things to some extent. But, they need to happen more extensively and with a wider range of employees, including young professionals. Many growing companies feel they cannot afford to divert key people to such activities. Therefore, tax incentives might help.

Government roles

Governments have three main roles:

1 Regulator – providing a legal and regulatory framework that is neither too restrictive that it stifles innovation, nor too laissez-faire that it allows dominant forces to prevail.

2 Actor – stimulating the development of knowledge markets and enterprises, including the Internet, teleworking, electronic commerce and innovation.

3 Intelligent user – being a good provider, customer, and partner in knowledge initiatives.

This is the order in which many governments concentrate their efforts when confronting new situations. However, it needs reversing. Many senior policy-makers are woefully ignorant of the dramatic changes taking place around them. They need personal hands-on experience of tools such as the Internet. Each level of government has its part to play.

Local government

Community initiatives, like those of the SBLN described earlier in this chapter, are where much innovation is taking place. Local government must be actively involved in creating the knowledge infrastructure -high-speed telecommunications, a range of education institutions and the development of community networks. They can often be the stimulus for bringing actors together and in identifying gaps, such as lack of continuing education in new knowledge-based skills. They should also participate actively in various international initiatives, such as Manchester has done in the Digital Cities programme.

National governments

Though few national governments will admit it, power in the knowledge economy diffuses both upwards and downwards – to supranational bodies and local communities. However, they have an important role as a knowledge hub. They should provide on-line services to citizens and businesses, and develop on-line democracy. Almost every policy area needs updating to take account of the new realities. Education needs to combine IT literacy, new knowledge networks and lifelong learning. Economic development policies must change from attracting inward investment of jobs, to creating sustainable knowledge infrastructures that attract innovative knowledge-based companies. They must start measuring the economy with the new indicators. Nova Scotia, for example, has developed knowledge quotients for its economy. Governments must support international moves towards legislative harmonization in key areas such as intellectual property and electronic commerce.

International government and agencies

The role of the EU in various information society initiatives has already been noted. Other regions, with their unique characteristics, could also benefit from similar concerted actions. The main developments, though, are likely to come through international agencies that have the broad support of many governments. These include the International Telecommunications Union, the World Trade Organization, the OECD and the World Bank.

Community initiatives

It is appropriate to finish coverage on public policy with this topic. For it is communities, both local communities based on geography, and global communities based on domains of knowledge, that are likely to be the main shapers of our future society. The Web and other virtual environments create the spaces for knowledge communities to form. However, if they are to reach their full potential they must go beyond mere knowledge exchange and develop collaborative agendas. Examples have been noted earlier – KEN, CommerceNet, SBLN, etc. All demonstrate how knowledge networking creates benefits for their participants and those with whom they interact. Successful communities follow the principles described in Chapters 6 and 8. They need a compelling vision, effective structures and processes, a good knowledge infrastructure and, above all, leadership.

Communities which make the most impact in the wider world will engage contributors from all walks of life – business, academia, government and the ordinary citizen. They need enrichment from all generations, all cultures and all regions of the world. They are knowledge networks within larger knowledge networks. They are a microcosm of the way that many of tomorrow’s institutions will be formed and operate. A crucial part of their agenda is that they therefore share their knowledge about creating sustainable communities.

Summary

The prosperity of individuals, enterprises and whole nations in the knowledge economy, depends on creating the conditions in which knowledge-based enterprises and entrepreneurial individuals can thrive. Too frequently the focus of policy-makers is on regulation and legislation. However, this chapter has given examples, from business networks in Denmark to high-tech regions such as Austin, Texas, where policy-makers have been active partners in stimulating knowledge-based initiatives that help create wealth. There are several prerequisites for creating the right conditions:

• Recognition of today’s realities – that the knowledge economy is different and that policies that worked in the past are unlikely to do so in the future.

• All sectors must be involved – creating prosperity requires closer collaboration between business, government, academic and research institutions.

• Initiatives at all levels – top down and bottom up; high levels of leadership to provide vision and inspiration must be complemented by ground level activity by committed individuals working through personal, business and community networks.

• Transnational collaboration – most opportunities and problems are not unique to a given locality.

The challenge facing anyone involved with policy-making is to develop appropriate transnational institutions which, while providing an overall global framework, do not enmesh themselves too closely with detailed regulation that stifles ground-level entrepreneurial activities.

Notes

1 World Bank (1998). World Development Report 1998/99: Knowledge. Oxford University Press.

2 World Economic Forum (1998). Global Competitiveness Report, 1998. WEF, May; IMD (1998). World Competitiveness Yearbook, 1998. IMD, Lausanne, June.

3 Massachusetts Technology Collaborative (1997). New Index of the Massachusetts Innovation Economy at http://www.mtpc.org (October).

4 Kozmetsky, G. (1994). Technology Transfer in a Global Context. Working Paper No. 294-04-01, Institute of Creativity and Capital, University of Texas at Austin.

5 Gore, A. (1993). The National Information Infrastructure: Agenda for Action. National Telecommunications and Information Administration, Washington.

6 Hof, R. D. (1998). The 21st century economy: keeping growth strong. Special Feature, Business Week, 31 August, pp. 108–109.

7 European Commission (1997). ACTS 97 Overview. DG XIII-B, EC, August. Information and project descriptions can be obtained from the ACTS Information Window (INFOWIN) website http://www.uk.infowin.org/acts/

8 Moran, N. (1998). Tensions rise between governments and the world of business. Financial Times, FT-IT, 1 April, XII.

9 European Commission (1993). Growth, Competitiveness, Employment: The Challenges and Way Forward into the 21st Century.

10 European Commission (1994). Europe and the Global Information Society: Recommendations to the European Council. EC, 26 May, p. 3. On line at http://www.ispo.cec.be/infosoc/backg/bangeman.html.

11 European Commission (1994). Europe’s Way to the Information Society: An Action Plan. COM(94) 347 final, July.

12 European Commission (1997). Europe at the Forefront of the Global Information Society: Rolling Action Plan. EC.

13 An index of projects are at http://www.g7.fed.us/. Details of progress can be found at http://www.ispo.be/

14 G7 Inventory of Projects at http://www.gip.int

15 Commercenet at http://www.commercenet.com/

16 European Commission (1997). A European Initiative on Electronic Commerce. Communication to the European Parliament, COM(97)157.

17 Various reports and working papers are available at http://www.ottawa-conference.org. Included are ‘Activities and initiatives in E-commerce’ and ‘Global action plan for e-commerce’, with business recommendations for governments.

18 European Commission (1997). Towards the 5th Framework Programme: Scientific and Technological Objectives. European Commission Working Paper COM(97)47, CEC, Brussels, February. Online at http://www.cordis.lu/ fifth/src/47-en-1.htm

19 Texas surpassed New York in 1997, to become second only to California in the number of high-tech jobs – 313 000 (Wall Street Journal, 5 March 1997).

20 Gibson, D. V. (1994). R&D Collaboration on Trial: The Microelectronic and Computer Technology Corporation. Harvard Business School Press.

21 Global Bangemann Challenge at http://www.challenge.stockholme.se