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o.memedovic@unido.org
UNITED NATIONS
INDUSTRIAL DEVELOPMENT
ORGANIZATION
Outsourcing
Outsourcingof ofthe
thesegmented
segmentedactivities
activities
Modularization
Modularizationininall
allstages
stagesof
ofaa to specialized producers in different
to specialized producers in different
production
productionvalue
valuechain
chain locations
locationsaround
aroundworld
world
ICT
application
Functional reintegration of the geographically dispersed in transport,
fragmented activities into new border-spanning business supply chain
management
arrangements of global value chains (GVCs) and production
and logistics
networks; TNCs have a key role in organizing and coordinating
these new business formation of global value chains and
networks
UNITED NATIONS
INDUSTRIAL DEVELOPMENT
ORGANIZATION
The effects: New concept of industry: from linear to interactive VC; Vertical specialization;
No clear division between manufacturing and services; Offshoring and outsourcing in
R&D: transition from an intra-firm knowledge base to an distributed intra-GVC/GPNs
knowledge base
Manufacturing
Manufacturing
Inbound Logistics
Design and product
development; in house
R&D
Design and Product
Development; R&D
offshoring
Source: Memedovic, 2002, 2005, UNIDO
UNITED NATIONS
INDUSTRIAL DEVELOPMENT
ORGANIZATION
Logistics'
GPN2 VC
GVC 2
Branding
&
marketing
Implications
Pressures for specialization and increased interdependences
Modularisation leads to commoditization of technological knowledge ⇨ the way out is innovation ⇨ the company
concept changes into an continuous innovator as competition drivers change: from efficiency and effectiveness to
continuous innovation and learning
Ideas and how to commercialise them become key resources for the knowledge-based economy
Technological advances in activities must co-evolve and complement each other for the the system to function as a
whole ⇨ Many technologies are used to create a product
Innovation is becoming more expensive and complex ⇨ Increasing demand for undertaking more
complex tasks in production and in management and for higher rates of innovation and at lower prices ⇨shift to open
innovation model
UNITED NATIONS
INDUSTRIAL DEVELOPMENT
ORGANIZATION
Leading firms (keystones ecology metaphor), occupying certain niche, coordinate co-evolution and
integration of innovation across numerous contributors spread around different locations of the world;
Their impact on the BE community (+/_) may be very strong and is also context (industry) specific.
Every agent in the space is facing continuous challenge to keep up with others in the BE co-evolution
supported by keystones. Cooperation and competition is necessary for innovation and for creation of
complementary capabilities.
DE comprise:
Technical infrastructure: hardware devices
Services and formalized DE knowledge
Regulatory: laws and regulations, contracts, etc.
UNITED NATIONS
INDUSTRIAL DEVELOPMENT
ORGANIZATION
New opportunities for the international sourcing of specialized skills (scarce), which
SMEs’ poses
SMEs can participate in different BEs/DEs (regional/global), hence securing their growth
SMEs can follow on the strategy of the firms in the BEs and engage in outsourcing and
offshoring
SMEs can learn and innovate in fast track manner through BE/DE
UNITED NATIONS
INDUSTRIAL DEVELOPMENT
ORGANIZATION
Lack of understanding of the upgrading challenge in the particular BEs in which they
participate: understanding BE characteristics (structure, governance, geography).
Insufficient access to information and training; limited managerial skills and financial
resources
Lack of direct contacts with customers: How to avoid captivity in BEs? How to protect their
IPRs?
PG benefits can spread beyond the administratively defined borders, and can
become regional or even GPGs. Their benefits can also be inter-generational, resulting
in innovations that are of benefit for the future generations.
The BE and DE organizational forms can also be considered as PGs in that they
facilitate collective provision of these PGs and these in turn reinforce collective action
and leads to increasing return to scale (e.g. their value to any participatory agents
increases as more innovative agents join in).
UNITED NATIONS
INDUSTRIAL DEVELOPMENT
ORGANIZATION
Complementary public goods: in the case of BE those are lows, regulations and their
enforcement, and monitoring systems to be able to correct for public bads.
In the case of DE, those include provision of technical infrastructure, laws and
regulations on norms and standards, and capacity building to process information.
UNITED NATIONS
Public Goods
Public Goods INDUSTRIAL DEVELOPMENT Asymmetric Information
Structural and Framework Factors–
ORGANIZATION Incentive Systems
Public/Private Governance
GOVERNANCE Macroeconomic Policies
Externalities
RULE System
Political of LAW FINANCIAL STABILITY
Investment Microeconomic Policies
KNOWLEDGE /INFORMATION
And
Rule of law
ENVIRONMENT Competition
INFRASTRUCTURE
Institutional Support System Collective
CorrectiveActions:
action
Players
S, T&E System
Resources Government
PPP MMaarrkkeett
(Capital )
Resources &
and market failures
NGOs
HUMAN
Human capital Market failures
PPP Social capital
SOCIAL Innovation &
Innovation and Productivity
Productivity Quality
Quality growth growth
Technical
Technical change
Natural capital
NATURAL Change
Physical capital
PHYSICAL
Private sector
Private sector
(not for Private
Government
profit) sector
(for profit)
Asymmetric Information
Externalities Barriers to entry
UNITED NATIONS
INDUSTRIAL DEVELOPMENT
ORGANIZATION
( Samuelson, 1954)
UNITED NATIONS
INDUSTRIAL DEVELOPMENT
ORGANIZATION
Collective action (planned effort by two or more agents to act together to achieve result desirable
for all) becomes necessary to supply PGs, through coordination, cooperation or coercion.
When mutually beneficial goals are not sufficient to ensure the voluntary participation in a collective
action (“collective action failure”), institutional innovation to facilitate strategic interactions conducive
to cooperation among individual agents are called for.
At the country level, that response is directed through the available institutional framework, with
the nation state at the center. At the supranational level, the response has to be initiated through
various forms of institutional innovation and voluntary coordination and cooperation, generally
among countries.
UNITED NATIONS
INDUSTRIAL DEVELOPMENT
ORGANIZATION
Economies of scale and scope suggest that it might be advisable for the institutional
response to have a wider jurisdictional coverage
UNITED NATIONS
INDUSTRIAL DEVELOPMENT
Local, regional and global impacts
ORGANIZATION
Regional
Local
Regional
Global
UNITED NATIONS
INDUSTRIAL DEVELOPMENT
ORGANIZATION
Region (administratively defined within a country) becomes the strategic level for innovations,
technological learning and upgrading.
For acquiring technological competences interaction between local and global knowledge networks are
also needed, and this is best achieved at the regional/cluster level.
Key challenge for the region becomes: How to deal with asymmetric knowledge capabilities and with
imbalances between knowledge exploration and exploitation (commercialization)? EU Challenge: Is
Europe becoming an exploration Platform for US?
For policy: RIS, learning regions, industrial cities and clusters can guide public policies to support
firm upgrading, productivity and competitiveness and for achieving long-term, innovation-driven
development strategies.
UNITED NATIONS
INDUSTRIAL DEVELOPMENT
ORGANIZATION
Global
Domain BE GVC
National
RIS:SMEs RIS:SMEs
Domain &Clusters
National BE/DE &Clusters
public
goods Regional/local VC
Role of
public and Business Environment
private
sector
Strategies, policies and programmes
Framework conditions
Memedovic, 2006,UNIDO
UNITED NATIONS
INDUSTRIAL DEVELOPMENT
ORGANIZATION
c. Intermediaries between a. and b.: knowledge transfer experts, innovation lawyers for
patents & IPR; investors (venture capital); business service providers, local government
agencies (development and innovation agencies); technology institutes
UNITED NATIONS
INDUSTRIAL DEVELOPMENT
ORGANIZATION
Regional Innovation
- System Knowledge application &
exploitation subsystem
BE(SMEs/Clusters)
Customers SMEs/Clusters
Competitor horizontal &
Contractors s
Collaborators vertical
Intermediaries: ICT
Knowledge
transfer experts,
innovation
lawyers for
Flows of resources:
patents & IPR;
knowledge, finance
investors
& skills; Building
(venture
trust and
capitalists); DE confidence in
business
institutions and
service
their reliability
providers, local
politicians; Technology Market mediating Workforce
knowledge mediating organizations mediating
explorations and organizations organizations
testing institutes
Governance Public research Educational
system: organizations organizations
embedded
structure ICT
Knowledge generation &
Memedovic after Cooke 2006, diffusion subsystem
UNIDO
UNITED NATIONS
INDUSTRIAL DEVELOPMENT
ORGANIZATION
NIS approach has been dominant in the past, now RIS is gaining in importance because
of the impact of globalization processes on local innovation and learning.
UNITED NATIONS
INDUSTRIAL DEVELOPMENT
ORGANIZATION
At the national level various institutions have the coordination role between national,
regional and local levels. Public like the National Innovation Agency, private like Industry
Association or Chambers of Commerce. ‘
At the regional level, there can be Regional Development Agencies, public organizations
such as universities, polytechnics and representatives from industry associations and
chambers of commerce
RIS:
Utilize existing social capital advantages and build networks
Stimulate collective learning through network building
Provide innovation support services (public and private or combined)
Integrate various financing means for start ups (multilevel public and private investments
(venture capital) for seed funding.
Provide regional financing and labor market adjustment services ( talent and skill formation).
Encourage collective entrepreneurship
Provide necessary infrastructure (business incubator facilities, science parks, zones, )
Coordinate policy through multilevel formal governance structure with a meso-governmental
body having leading role.
Increases returns from agglomeration economies
UNITED NATIONS
INDUSTRIAL DEVELOPMENT
ORGANIZATION
Relations between clusters and RIS in already established industries and how these are
formed ?
What relations between clusters and RIS are needed to trigger the emergence of new
industries (clusters)?
Asheim and Lars, 2005
Recent research on SME policy and economic development points to the need for a more
systemic approach and for a more pro-active SME and entrepreneurship innovation-based
policy
UNITED NATIONS
INDUSTRIAL DEVELOPMENT
ORGANIZATION
Specialization vs Diversification?
‘Jane Jacobs’ models (1969): benefits of diversity in urban and regional economies
are driving forces of economic growth.
A ‘related variety’ industry requires more than simply sector-specific policy support.
The co-existence of many intra-regional clusters with various knowledge bases and
different relations to the RIS calls for more developed governance structures to
secure a planned and systematic co-ordination between industry and knowledge
creating and diffusing organisations.
National &
Regional
Constructed
Advantage
what type?
Universities Industry Government Analytical/symbolic/
synthetic
Thank you for your attention
o.memedovic@unido.org