Centre for Information & Knowledge Management

“Ireland and the Knowledge Economy: Ireland’s knowledge problem”

Jamie O’Brien

Contact DetailsEmail: jamie.a.obrien@ul.ie 1

Me

• PhD researcher with the Centre for Information & Knowledge Management

• Economist plus lots of other things

• Area of Interest: knowledge assessment in the Irish high technology sector, knowledge management in the Health Sector

2

Trends and Implications

3

Ireland 2000

• Top 5 richest countries in the world

• Full Employment

• Economy driven by exports

• 4th most competitive – Favourable tax regime– Genuine growth opportunities– Competitive wages

4

Ireland 2009

• As of Feb 1st 2009, 325,000 on live register• Ireland loses its AAA credit rating, now AA+• 9.2% unemployment in January• 11% as of right now and rising

• Predicted by end of 2009; 400,000 on live register, probably will be higher

• Personal household debt- 185% of total available income in 2006

• No safety valve of immigration this time!5

What caused the Problem?

• Irish economy artificially inflated on construction, housing by developers & bankers– Cheap easy credit, banks loaned money to people who

could not afford to pay back

• Manufacturing sector in decline since 2001– 2000-2007 (34,000 jobs lost in manufacturing)

• Had all this money......but forgot about fostering the knowledge economy...

• What about knowledge? We have a knowledge problem!

6

Knowledge

• Knowledge....knowledge knowledge?? What is it?

• Lots of definitions and opinions on this

• Types: Know-what (information), know-why (specialised), know-how (skills- surgeon) and know-who (who knows what)

• Simply: Knowledge lets us code the meaning of information. Information is meaningless unless given perspective.

7

Knowledge Ecomony

• Term knowledge-based economy?

• Knowledge has always been central to economic development.....we just didn’t get behind it

• Only recently been recognised as important

• Knowledge-intensive service sectors, such as education, communications and information, are growing faster

8

Knowledge Economy

• Intangible investments in research and development (R&D)

• It is skilled labour that is in highest demand in the OECD countries.

• Average unemployment rate for people with lower-secondary education is 10.5 per cent, falling to 3.8 per cent for those with university education

9

Ireland’s Knowledge Intensity

• Derived from R&D intensity in the Business, Higher Education and Government Sectors

• Ratio of investment in knowledge to GDP was unchanged from 1997 to 2004

• R&D linked directly with knowledge and growth (Romer 1986)

• Ireland remains below the average R&D performance (14th of 17 in OECD survey ahead of Portugal and Hungary)

10

Ireland’s R&D Performance: An E.U and OECD Comparison

11

  % GNP 2000IRELAND

% GNP 2006IRELAND

E.U. 2006 OECD 2006

Gross Expenditure

on R&D

1.32% 1.56% 1.77% 2.26%

Business Sector R&D

0.94% 1.05% 1.12% 1.54%

Higher Education

Expenditure on R&D

0.27% 0.40% In Line with E.U.

In Line with OECD

Government Sector

performed R&D

 

0.11% 0.11% 0.24% .27%

Total Researchers

  

4.8 per thousand

5.9 per thousand

- 6.9 per thousand

So what can be done?

• Well you cant manage a problem unless you can measure a problem

• few ways of looking at knowledge!• Endogenous growth theory looks at the link

between knowledge and long term growth• Intellectual capital theory looks at intangibles• KM theory looks at management audit models• OECD takes a conceptual framework approach

12

Knowledge & Economics

• Traditional production functions focus on labour, land, capital, materials and energy (Neoclassical Economists)

• Knowledge and technology are external influences on production (Robert Solow)

• Investment in knowledge lead to long term growth (Paul Romer)

13

Endogenous Growth Models

• Learning-by-doing models (Arrow 1962: Lucas 1988: Stokey 1988)

• Invention based models (Romer 1986: Aghion & Howitt 1992: Jones 1995)

• Hybrid models (Young 1993)

14

Brief look

• Learning-by-doing: technical change (knowledge) be viewed as endogenous (internal) to the economic system and secondly for attempting to offer an account of what constitutes technical change (the active attempt to problem solve)

• Invention based models: technical change (knowledge) is seen as the product of profit maximising agents at micro level, while at macro level, knowledge is channelled into growth through increased firm efficiency and knowledge spillovers

15

Measuring Intangibles (IC)

• Capital is “knowledge imposed on the material world” (Boulding 1966: 5)

• To the Physiocrats of pre-Revolutionary France, it was the surplus generated by agriculture

• Decreasing amount of economic activity now involves the manipulation of physical assets

• Intangible assets such as knowledge have instead become the dominant value driver at firm level (Low 2002: Bounfour & Edvisson 2005: Chartrand 2005)

16

Intellectual Capital (IC)

For the purpose of the framework IC has been broken down into:

• Human: has been defined as the individual stock of knowledge accumulated by a firm’s employees

• Structural: refers to the procedures, systems, routines and rules that comprise the core of the firm

• Relational: encompasses knowledge that is embedded in all of the external relationships that a firm develops with its stakeholders; competitors, customers, suppliers

17

Knowledge Assessment Framework (KAF)

• Derived from OECD standard indicators for knowledge, endogenous growth models, KM auditing models and Intellectual Capital

• OECD- Factors and constructs• KM- Tacit/Explicit/Implicit knowledge and

structure• EGT- Learning-by-doing/Invention • IC- Human/Structural/Relational

• For use at organisational level18

Location

• Ireland; why? Research has a sense of urgency given economic climate, R&D and knowledge deficits, access.

• High-Technology sector as defined by the OECD; why? High knowledge sector with large amounts of knowledge workers.

• Definition: comprised of computers, electronic-communications and pharmaceutical industries.

19

Knowledge Assessment Framework (KAF)

KNOWLEDGEINTENSITY

INDEX(K.I.I)

Technical Staff(1) Patents(3)Expenditure on R&D(2)Technology Transfer(2)

Embodied Technology (3) Amortised Annual R&D(1)

Disembodied Tech (2) Stock Research Personnel(1)

In Surveys(2) Communities of Practice(1)

Outsourcing of R&D(3)

Training Programmes(2) Education(3) Experience(1)

New Market Products(2) Publications(2)

Patents Granted(3)

KNOWLEDGE INPUTS

KNOWLEDGE STOCKS &

FLOWS

KNOWLEDGE NETWORKS

KNOWLEDGE LEARNING

KNOWLEDGE OUTPUTS

FACTORSCONSTRUCTS

Learning Invention

Red = Human Blue =Structural Green= Relational

Tacit (1) Explicit (2) Implicit (3)

20

KEY

Knowledge Intensity Index (K.I.I.)

• Almost like a knowledge gap analysis

• Factors: actively contributes to an accomplishment, result, or process (FactorConstructK.I.I.)

• Constructs: form by assembling or combining parts (ConstructK.I.I)

• Knowledge Intensity Index (K.I.I): K.I.I. shows the knowledge intensity of an organisation

21

Constructs

• Knowledge Inputs

• Knowledge Stocks/Flows

• Knowledge Networks

• Knowledge Learning

• Knowledge Outputs

22

Knowledge Inputs

• Technical Staff- information on employees such as the level of education and number of technical staff, can be collected

• R&D- any creative work undertaken on a systematic basis in order to increase the stock of knowledge

• Technology Transfer- payments for production-ready technologies or know how

• Patents- the representation of ideas themselves, patents are the closest to direct indicators of knowledge formation

23

Knowledge Stocks/Flows

• Embodied Technology- Embodied technology is the introduction of context into production processes of machinery, equipment and components that incorporate new technology

• Disembodied Technology- is the transmission of knowledge, technical expertise or technology in the form of patents, licenses or know-how within an existing domain

• Amortised R&D- R&D stock relative to production has been used to estimate rates of return to R&D investment

• Research Personnel- measurement of personnel employed

24

Knowledge Networks

• Communities of Practice- Informal networks tend to be based on personal contacts or communities of practice

• Innovation Surveys- surveys capture information about the factors affecting the propensity of firms to innovate

• Outsourcing of R&D- new types of collaborations with research organisation & activities in research and development, production, procuring, distribution, recruiting and ancillary services

25

Knowledge Learning

• Training- assessed by questions on human resources and training

• Experience- Each worker requires skills obtained through education which usually gives rise to formal qualifications in the shape of degrees or diplomas, whose equivalence may be recognised internationally or through training or on-the-job experience

• Education- labour force with particular educational attainments

26

Knowledge Outputs

• New market products- the Oslo Manual distinguishes three relevant concepts: new to the firm, new to the market and new to the world

• Publications- by academic publication (a common codified pool of knowledge)

• Patents Granted- legal property right to an invention, which is granted by national patent offices

27

Conclusion

• Some Findings:1)There is no consensus at organisational level

about how to manage knowledge2)“Man A”: Knowledge Sharing was not

happening, active encouragement to “stick to ones area”. To “Man A” new knowledge is “new deliverables”, a new system outperforming and older one.

3)“Ser A”:What is your company’s knowledge base? “Its in its people, the knowledge itself is coming from the people who've done the work, from the experience that people have”

28

Conclusion: What must be done!

• Heavy investment in knowledge – ours has remained unchanged since 1997.

• “The Global Stage”- We have to develop the things the world needs! Where is next billion customers, China, India?

• Still need to attract cutting edge companies• Change our mentality, Irish as the box

packers, need to be the people developing the things that go into the boxes.

• A lot out of our control, so do what we can do...

29

Exam Questions

• EQ 1. Issues facing Ireland at the moment that require us to become smarter?

• EQ 2. The ways Ireland’s Knowledge Intensity is measured?

30

The End...

Thank You

31