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Public-Private
Partnerships (PPP)
Prof. Piero Formica
is Dean of the "International University of Entrepreneurship"
in Ijmuiden, Amsterdam; professor of Economics of Innovation,
Master School of Business Law, University of Bologna (where he
has been member of the Board of Directors between 1988 and 1992);
and visiting professor at the Institute of Technology, Tartu
University, Estonia. Prof. Formica has over 30 years of experience in the fields of international economics and economics of innovation, working with the OECD Economic Prospects Division in Paris, large corporations and small companies, governmental bodies and the European Union. In the business world he is involved as director of internationalisation to the Zernike Group in the Netherlands, an international company that runs seed capital funds and promotes the commercialisation of innovation and know how. Prof. Formica is a member of the IASP (International Association of Science Parks) Scientific Committee, member of the board of directors of Transinnova (Rouen, France) and member of the Knowledge Management Entovation Network and of SPICE, an international network of Science Parks and Incubators experts. Educated in Italy and the UK, Dr. Formica is a member of the Editorial Board of the New Academic Review, London, editor of the China High Technology Enterprises Journal, and co-editor of the e-Journal of the Business of Experience and Innovation. Over the last decade Prof. Formica's research has been addressed to industrial clusters, business strategies for innovation, new company formation and spin-offs, science parks and incubators, knowledge management, organisational innovation in higher education, the digital economy, and entrepreneurship. He has written widely on these subjects. Among his works: Tecnopoli- Luoghi e sentieri dell'innovazione, ISEDI,Torino; Innovation and Economic Development, University-Enterprise Partnerships in Action; Delivering Innovation-Key Lessons from the World-Wide Networks of Science and Technology Parks Spin-offs from Innovative Learning Environments: Doing Business in the Knowledge Economy; Essay Topics in Technology Transfer, and Frontiers of Entrepreneurship and Innovation.
The following paper was submitted as background for a conversation with Piero Formica, August 22-September 2, on public-private partnerships for knowledge dissemination and transer Analyzing Knowledge Policymaking in Managed and Free-Market Economies
The co-evolution of ideas (the content) and their historical, social, organizational and institutional forms (the context) has been the mainspring of economic growth throughout history. It is the stream of human activity; its flow of energy that makes possible the co-evolution that marks one civilization from the next. The energy circuit of the sailing-ship era or that of the iron-hulled, ocean-going steamship age differs widely from today. To take a course appropriate to the changing times, the flow of energy needs a proper policy. The distinguished novelist Isabel Paterson laid the foundations of the reasoning behind this recommendation in her masterpiece, The God of the Machine, published in 1943. Sixty years or so later, the time had come to reappraise that theme. In their celebrated book, The Knowledge Creating Company, Nonaka and Takeuchi (1995), portrayed the Paterson's flow of energy as a flow of knowledge where innovation is instigated by the ability to create knowledge and manage it. The organizational form affects the manner in which this happens. Altogether ability and organization make the "space" available in the flow to accommodate innovation. Today Nonaka's and Takeuchi's view is entrenched in the managers' thinking. By far less explored and even more controversial the argument seems to be that the organizational form and its evolution (organizational innovations) at the flow level is under the influence of the political institutions' workings and, therefore, the government policy through regulation on knowledge creation, dissemination, application, and management. Indeed, the government policy stance should take something of a front seat in the knowledge economy. Knowledge flows with contained context and values. Knowledge-relevant economic policy (from now on, shortened as knowledge policy) carries far-reaching implications on both.
2. Corporatism takes center stage That the corporatist model has repeatedly failed to rise to the challenge of the knowledge economy is not recognized first and foremost among the cognoscenti of corporatist groups, with media pundits and academics to the fore, not to mention their average member. Impresario of the knowledge economy is meant to be the corporatist government.
In the 1980s, many of the Europe's political leaders, political scientists and economists sought to restore the concept of corporatism as means to govern the domestic economy (Andersson, 2000: 1). In those days MIT's Lester Thurow had argued that corporatist, consensus-based and coordinated market economies existing in Europe were "best placed to excel in the new, knowledge-based industries thanks to [their] tradition of corporatism and [their] publicly financed intellectual infrastructure". By contrast, liberal market economies, which rely on free market mechanism to regulate economic relations, were not able to do their job properly. The U.S. economy, for example, "was too competitive and cowboyish for that". All this was said and written at a time when the American economy was to become the most attractive place for the advent of the tech boom (Thurow, 1992; Watson, 2002:15).
As it has been noted by Andersson (2000: 1), "corporatism could be a successful social organization in a stable economic environment, but in a volatile economic environment this need not be the case". This is one of the reasons why the locus of access to knowledge markets should move from corporatist, interest-group representation to free agents of knowledge innovation, who need the level playing field of the liberal market economy. These agents should rely on free market-supporting regulation, which would help them cope with volatility and rapid changes of the economy by playing to their strengths. This type of regulation acknowledges that the public interest content of knowledge can be achieved, lending force to the expression of personal freedom and competencies. Conversely, any sort of policy conjuring up with the corporatist groups' views of regulation ends up relying on government handouts that subdue a free, truly open market. 3. The knowledge age: a golden future in sight? We are living in fast-moving times and discontinuous changes, when nimbleness, speed, transparency and local sensitivity have become absolutely essential to success. The movement from the machine age to the knowledge age has raised the awareness of the need for replacing the old guard of atom-based firms with a new breed of counter-cultural, digital-rooted companies. They employ brains instead of hands, invest in new concepts and contents rather than in new machines, accept fast change as a constant, behave as co-opetitors who collaborate and compete with other companies at the same time to generate new market spaces, instead of fighting for the existing markets. Knowledge markets are now poised to expand their role as a motor for economic development. If we are to have a bright economic future, knowledge markets are likely cast in the role product markets played all through the industrial era.
Yet, we are still in a transition from the decline of mass-production economy and the rise of value from knowledge. Value from efficiency and scale is no more a competitive differentiator. The major significance of the new age is value from innovation that comes from the life-blood of knowledge in action. Shared knowledge and collective intelligence has replaced the three traditional pillars of value creation: that is, land, labor, capital - with knowledge essentially of the type incorporated in machines and other tangible assets.
Albeit the power of knowledge to forge the economy and society has never been so memorably and sharply put as it is in the present circumstances, most companies have not succeeded, so far, in seizing the vast opportunities for knowledge innovation. In an ever more demanding market of talents, knowledge capacity is underutilized and industry leaders do not aspire to follow in the talents' footsteps.
This disheartening economic climate depends on how modern economic policy is shaped. The blade of the policymakers' sword lies on the knowledge workers' neck. In fact, policymakers have an encompassing interest in acting as front people for the pleadings of corporatist groups.
In a knowledge economy what people should replace the leading corporatist actors of the national-industrial state? Answering this question implies rethinking the policy model built upon the exercise of power through the bureaucratic structures of corporatist organizations. Voluntary and open market-based communities of knowledge practice should be overtaking the community of interests organized into corporatist groups and operating in sheltered markets. The former outperform the latter because their flexible processes of disciplined pluralism, opposed to the rigid processes of forced allegiance to the guild, promote innovation.
In consequence, the fundamental political problem of knowledge-led economic growth is that of devising the appropriate means for channeling government action into support for CKP-driven markets, so predatory behavior by professional corporations (the fiefdoms of modern times) would be totally alien to the policymakers' collective experience. Oddly, knowledge policy is destined to become a leading villain, both in government and across the beleaguered industry. Although a lengthening queue of free agents of knowledge innovation are petitioning the government for relief from corporatist policy intervention, corporatist groups have been successfully seeking to tap into the policymakers offices to sell their influence in order to get special privileges.
4. The springboards for corporatist policymaking Corporatist policy deliberations are the product of bargaining and consensus - that is, of exchange and ongoing negotiations between corporatist groups, syndicates (the so called "social partners") and government within a developed corporatist institutional structure. There are formal institutionalized relations between these organized interests and governmental policy. Special-interest groups, whose access to public authorities makes it possible to influence policymakers to fit specific interests, easily sway government policy. "Double-positions" - the fact that oftentimes representatives of corporatist institutions play an important role in political parties - contribute to align corporatist and public interests (Saul, 1994). The inspiration of corporatist policymaking lays partly in principles drawn from the medieval system of craft and trade guilds that brings over-regulation, politicized practices, barriers to competition, lack of transparency - that is blockages to the flow of knowledge.
For most of the nineteenth century or so, a corpus of laws was draw up to establish "officially-recognized knowledge" of practice. Policymakers undertook the consequent action of protecting by means of licenses the roles assigned to the professional corporations stemming from that corpus of laws (Dingwall, 1996: 4). In modern times, the biggest thrust to this enduring process of corporatism-building came from the communitarian and corporatist theories characteristic of the 1920s and 1930s: on the one hand, the "State corporatism" of Primo de Rivera and Mussolini;3 on the other, the "Societal Corporatism" of Wilson's National Economic Development Council and Roosevelt's New Deal (Lloyd-Jones, 1994: 4; Formica, 2003a: 243-244). If dictatorial governments like the Fascism in Italy gave legislative representation to the corporatist groups, under the New Deal democracy the jump forward into corporatism meant that policymakers and administrators were strongly influenced or even dominated by the interest groups. From then on, as it happened in the Middle Ages, there has been a close connection between the public authorities and the representatives of those groups. This connection is twofold: on the one hand, corporatist officials are appointed to serve in local and national governments; on the other hand, for whole classes of professional corporations (e.g., lawyers, doctors, consultants) government is both a vital funding source and the main entity with which they work helping organizations and individuals to deal with it (Locke, 2002). 5. Knowledge policy in the public interest: plenty of room for policymakers? The frustration arising from the corporatist model has become apparent with the growth of the knowledge economy. Yet, the clock is still turned back by corporatist policymakers who wish to remold today's knowledge society into a likeness of the medieval guilds. The more policymakers' workings are opened to corporatist consensus, the more effectively lobbyists and special pleaders can manipulate them. The government has to "take responsibility" and "do something". This is a widespread habit that has gone further than the management of the flow of material goods. With the advent of the knowledge economy, the stage has been set for ensuring the flow of knowledge and intangible assets (e.g., brands, patents, R&D projects, trained staff) by means of policy measures. Accordingly, policymakers step into the role of context builder that should favor human interactions with the aim of transforming those assets into wealth creating resources. The prevailing doctrine, stated simply, is that policymakers have to deploy and direct resources towards the intellectual capital with a view to exercising more effective sway over individuals and organizations that create, disseminate and transform knowledge.
In doing so, the question to focus on is whether the market is the natural and necessary milieu where free agents are allowed to fly unbounded to make their decisions concerning innovation, or else those decisions should be deferred on the functional representation of the corporatist system, which disrupts the autonomous operation of the free market. Put it differently, the choice is between a "constructive" government policy that encourages brain circulation, which is the best way to get an exchange of knowledge, and therefore helps those agents to embark on innovation journeys; and a "restrictive" policy that keeps them from doing so because the exercise of professional activities is restricted by a patchwork of rules and procedures. The second policy option, which means a strong impact of the state and the professional corporations on knowledge formation, dissemination and use, would force the agents of change to retreat into the shell of corporatism instead of being a locomotive of unrestricted competition in the open market. Otherwise, they would be regarded as strangers held at bay by corporatist policy. There would be no alternative for them but to emigrate. Brain drain would prevail over brain circulation. Indeed, a "brain drain" trend is firmly entrenched in the European corporatist society whose hyper-regulatory bureaucrats think that it is better to have status-quo security than liberty and are thereby the fiercest opponents of the great influence on society free agents of knowledge innovation can exert. Insofar as the fundamental essence of the corporatist society is that of undermining the legitimacy of the individuals both as citizen in the democracy (Saul, 1995) and free agents of innovation in the economy, the control of knowledge by using corporatist policy instruments becomes self-righteousness. Should this doctrine be called into question by its poor achievements, the boundaries of policy and the attitudes of policymakers would markedly change, and the government role restricted to the definition of a policy context conducive to the grassroots development of free agents of knowledge innovation. 6. Corporatist policy versus growth-promoting reforms Corporatism has refrained essential domestic reforms that, by unleashing the power of knowledge innovation, would unlock much-needed growth. Corporatism is a world of stock of separated experiences within which innovation is constrained by the corporation's code and assumptions about how to do business and negotiating relationships. Power flows through negotiations of corporatist leaders with government officials and party cadres. A better breeding ground for conformity is hard to imagine. Reforms are rejected by a strong message of inevitability: "shigata ga nai" -"nothing can we do about it" sounds like a mandating rule that actors on the territory of a corporatist state must obey. Top priority is to redistribute the benefits and costs of corporatist policies, rather than to promote reform-supporting policies. People belonging to a corporatist group think inside the group's box instead of outside the box in order to build on the opportunities opened up by the knowledge economy. Within corporatist groups, corporatist-functional interests discourage colleagues of the same practice to form innovative communities. It does not matter whether you are good or bad as long as you remain in the ranks. Take the instance of the healthcare reform. In a corporatist context, framework agreements with the doctors' association rule out the option of allowing health assurance funds to draw up contracts directly with doctors, which would be a move towards a free-agent knowledge economy in the healthcare industry.
Hence the corporatist structure with strong power conferred on special-interest blocs seems not a successful way to organize society in the knowledge economy to encourage growth.
Indeed, in the 1990s, European corporatist states showed a poor performance on production, employment and productivity. Especially in regard to the connection between the regulatory environment, levels of information and communications technologies (ICT) investment and productivity growth, a study by OECD notes that a heavy regulatory environment results in low growth potential.
In one respect, the poor score of those countries where the regulatory environment is molded to the corporate bodies can be viewed as a consequence of extensive constraints on the manner in which companies, knowledge innovation agents and consumers can pursue their goals. In the next paragraph this argument is brought forward with reference to subsidies-based negotiated corporatism. 7. Subsidies-based negotiated corporatism versus open-ended market guidance The idea that knowledge innovation needs to be supported by the robustness of government, which is opposed to the fragility of markets, has created a high-powered arsenal of government subsidies distributing a variety of public handouts. A subsidy machine, which is a systematic way for government to distribute favors to special- interest groups, subdues most of the knowledge markets. Simply put, it means the politicization of these markets. Negotiated corporatism, one out of a many variants of corporatism (Formica, 2003b: 247-249), is entrenched at the top of the subsidies' mountain, which, in turn, produces a powerful me-too attitude among companies as they compete in the "partisan" politicking market for resource and support rather than in the free market for new commercial outlets and clients. Subsidies-based negotiated corporatism and the underlying protectionism shield companies from competition-driven innovation. Fiat is a case in point. The Italian carmaker has been the last producer to install catalytic converters in cars and only in 2003 did it offer standard two-year product guarantees, well after most of its competitors.
In principle, government policy that covers by subsidies high developmental costs of knowledge innovation can be regarded as appropriate as long as there is a defined plan to phase them out. In practice, this outcome is problematic insofar as that policy is shaped on the anvil of corporatist power, which portends a loss of companies' autonomy. Companies have not the autonomy to employ knowledge innovation agents. The politicization of the knowledge markets signifies that corporatist state-biased consultants, engaged in subsidies-seeking deals on the behalf of special-interest blocs, manage subsidies. These "warriors of subsidies" put knowledge agents pledged to create innovative ventures and governed by comparatively open-ended market guidance on the back foot. Besides these worries, there is also the preoccupation that business subsidies in a corporatist regime of tax complexity, featured by high social security taxes, high marginal rate of income tax and high taxes on property and capital, drive a large number of the operating decisions, and hence innovation strategies. The more complex the tax regulations are, the more potential loopholes, and the more time wasted finding and exploiting loopholes instead of being focused on the capacity to innovate (Kevin Meyer, E100 Voice). If there were a growing recognition among policymakers that the power of knowledge innovation is a fundamental driver of strategic changes, governments, accordingly, would do much to downplay subsidies as a way of promoting knowledge innovation. In the frame of open-ended market guidance, a new knowledge policy would be structured by which more stress would be laid on a greater role for the array of initiatives that free agents could put in practice both within national frontiers and across borders. 8. Top down corporatist groups versus bottom up communities of free agents Policy interventions based on corporatist solutions are a conspiracy of the representatives of professional corporations against the laity of free agents of innovation, who cannot compete with them on even terms in the knowledge markets. Among the most corporatist societies, Japan and Italy are a case in point. In these countries politically over-represented interest groups made up by the incumbent businesses, professional societies and trade unions fear major changes in established relationships and thereby exploit their current relationships with bureaucracy in order to keep fees and entry barriers high, and exclude new entrants and outsiders altogether. Bureaucrats, meanwhile, maintain their power by assuring that those syndicates and regulatory structures reinforce each other. Powerless against the corporatist state and hence reduced to the role of secondary participants, the knowledge innovation agents begin to decline. They have no alternative but to make the hard choice to get into the upper ranks of the professional corporations where they could have access to the corporatist group-state relations and perhaps gain some influence on the decision- making processes. However, in taking this shelter, free agents would turn from bottom up form of lives into top down corporatist groups. They would be poised to confine their role within the stringent rules and procedures of the professional corporations. Coercive contracts would force them to do what the corporations want. At this point, it would be proving impossible the formation of communities of free agents as vehicles of knowledge innovation, ensuing from a long-lasting and spontaneous phenomenon of informal, cross-functional and cross-boundary interaction between individuals.
From their experiences two initiatives have been spawning. One is a consulting firm ENTOVATION Alliance, which is a subset of the E100 where a select group of about 18 members have paid a small fee, signed NDA's, and agreed to participate in creating an economically viable consulting business. This is not an exclusionary group per se, but is a group that is focused on building a consulting business that will return fees and royalties to the others in the Alliance and to ENTOVATION through a 5% + factor. The other related but different initiative is a virtual city, En2polis, which contains the Alliance plus others in the E100. It is quite possible that it will have some overlapping opportunities. 9. Dissociated corporatist consensus versus unitary community consensus The received wisdom of the corporatist consensus is that the efficient operations of markets, be they product or knowledge markets, need policy measures built up on the foundations of consensus laid by the corporatist groups. In the past, this argument has lent decisive support to the policymakers stepping into the product markets. Today, the apologists of the corporatist consensus argue that it would not have to be rethought in the case of knowledge markets. This form of consensus is the outcome of an incestuous relationship perpetuated by mainstream politicians and representatives of corporatist institutions. Relying on instruments of co-optation instead of pointing to the need of effectual representation, they become closer to each other than the politicians are to the citizens and those representatives to their members: oftentimes the former are out of touch with the latter they ostensibly represent. More than that, they work together to keep out new forms of association, as it is the case of the communities of free agents. These makers of knowledge innovation, who never gain a meaningful voice, are barred from promoting innovative practices that may have much to contribute to a regime change: from a closed-innovation regime of the corporatist associations deeply embedded in the industrial society to an open-innovation regime of the knowledge innovation® communities.
Besides avoiding anything new or controversial, the incestuous consensus shows a dissociated nature. All interest groups have the political power to lobby for special protected benefits. The "give me more" attitude of each and every group is stifled because it relies on an unending process of mediation by which no single interest group should obtain any advantage over another. The complementary effect of an unrelenting mediation is that new energies are not available to be channeled toward innovation. Corporatist leaders' ability and willpower are constantly addressed at deploying and directing resources toward the familiar routines. The outcome is that too often policymakers become embroiled in a fierce brawl over "drilling holes in the ground as long as there [is] unanimous consensus" (Saul, 1995). The corporatist society therefore faces a slow death by consensus-based decision-making that has hit a wall. Opposite to the incestuous, dissociated and institutionalized corporatist consensus, the informal consensus is unitary given that it is reached in a context of spontaneous interactions between free and heterogeneous communities of knowledge practitioners. In fact, this form of consensus encourages discordant voices and collision of ideas that make the consensus area look broader and deeper. The breadth of consensus adds immeasurably to its quality, and the additional value created by doing so can be channeled into the different communities in accordance to their own capabilities. 10. Standardization versus creative ideas Adam Smith was a trailblazer in the field of the distinctive arrangements that should underpin the liberal professions. His thought was that "the knowledge of liberal professions cannot be standardized in the same way as that of a mechanic trade" and that "The real controls on quality [of the professional services] are the disciplines of the market" (quoted from Dingwall, 1996: 2). Contrary to Smith's perspective, a conventional argument for professional corporations is that they exercise an effective control on the quality of the services provided by their associates. This control is made possible by an explicit body of rules through which the knowledge of liberal professions is somewhat standardized. In view of the above, policymakers encourage competitive benchmarking exercises, which, in turn, favor performance measures focused on actions pursued by competitors rather than on what the buyers want. This reinforces the corporatist behavior that spontaneously drives each and every member of a corporatist group first to rate her/himself against the other members of the group and then reacting according to a "me-too" attitude at the expense of the real requirements of the buyers. Shifting the focal point on the latter means that the discipline of the market substitutes for an introverted control. When hit with this change, those knowledge workers who previously were constrained by conventional corporatist rules could be remarkable at creating new market spaces by means of knowledge innovation®. Whereas, if the former attitude were to become even more attractive thanks to intervention policies of that kind, standardized solutions (i.e., identical for all market players) would come to be accepted as an established fact. 11. Knowledge stock versus knowledge flow Knowledge providers embedded in corporatist groups treat knowledge alike physical capital: that is, as a stock term. Since each guild typically relies on a specific type of codified knowledge, the knowledge stock is equal to the stock of individual pieces of that sort. Their decisions, which concern the desired level of the knowledge stock, are twofold: Reuse of existing knowledge
Optimal adjustment of knowledge stock
By contrast, the free-agent perspective conceives of knowledge as a flow of interrelated and interdependent knowledge components. The desired rate of knowledge flow is the main decision, which follows two lines: Complementarities among knowledge components
Optimal behavior
Policymakers of co-ordinate market economies emphasize government-sponsored economic programs that stem from tripartite arrangements, in which the public and private sectors are called in to co-ordinate their efforts for the purpose of developing new technologies and industries. According to this policy view, government financial assistance is granted to government-run and government-backed agencies by direct subsidies and long-term implicit contracts with the government, not rarely masqueraded as public bids. In both cases, professional corporations exert a great influence on and are instrumental in the realization of the agencies' projects. Convoluted and inflexible criteria and procedures encapsulated in the bureaucratic codes of those arrangements do not allow to make timely decisions and to act decisively. This is the context that spotlights "knowledge stock" type of decisions, which will be going to prevail over "knowledge flow" decisions. Worst of all, subsidies and implicit contracts with the government set in motion a cumbersome process of intermediation by the agency. In turn, the latter deflects the decisions made by the agency's knowledge providers - the professional corporations - from the discipline of the market, for the subsidized agency shelters them from this discipline. This explains why a country that pursues such a policy is condemned to remain an under-achiever in the knowledge economy. Liberal market economies have traditionally been viewing with suspicion direct government involvement in the economic arena. Their policymakers show a preference for one kind of provider (the free agent) over another (the agency and its acolytes), and to knowledge consumers over knowledge providers. Market incentives, basically in the form of tax credits, are harnessed in a way that, for one thing, will benefit consumers and, for another, stimulate small-scale market arrangements implemented by free agents in the frame of an open-ended market guidance (see par.7). Knowledge decisions are very much a matter of "flow", and free agents must learn to "go with the flow" if they want to perceive the direction of markets, competition and technologies that fundamentally change the way business is done in the markets they serve. 12. Knowledge recycling and diversion versus knowledge creation Much has been written and spoken about the accumulation of production factors (that is capital, labor and raw materials), which would explain long-term growth potential. Peter Drucker's and William Baumol's focus of attention, respectively, on knowledge and entrepreneurship has thrown the spotlight on these factors as inputs that must be combined in profitable ways. It is knowledge creation, fuelled by the joined influence of human creativity and entrepreneurial energy channeled into productive innovation (Baumol, 2002) that makes successful the combination of various factors of production. In turn, the effectiveness of the instrumental role played by knowledge creation is attributable to the culture of the institutions involved. An institutional environment that encourages creativity and experimentation is the ultimate determinant of economic growth and renewal. In the corporatist environment of consensually managed economies, everything is made far worse by a plethora of conflicts of interest. In particular, policymakers are more concerned with pleasing corporatist groups, and the latter with blessing elected politicians and their officials, than with creating room for knowledge innovation dynamism. This results in uniform standards by setting rules that abate the value of the knowledge flow and its pluralist process of diversity, investigation and experimentation. The door is closed to the process of "knowledge creation". Conversely, policymakers take all the decisions whereby moves will be afoot that would enforce the alternative process of "knowledge recycling and diversion". Even more disturbing is the influence of all sorts of vested interests on the fixations of theories and practices of entrepreneurship, innovation and management which prevent the advance of knowledge beyond the borders of the competencies required to make successful adjustments within the limits marked by the given context of current specialization. Working otherwise, unconstrained by the predictable standards of business behavior fixed by the corporatist language - so as to open the door to knowledge creation - encounters dogged opponents in the interest groups. In such cases free agents cannot reach the critical mass needed for knowledge innovation, and their attempts to fill the gap between recycled knowledge and new knowledge look like an uphill task. That is why in the managed economies innovative undertakings are extremely onerous and thereby few and far between.
Source: Donkin, 2003: 10; Formica, 2003B: Chapter 1 13. A framework for failure: why technology-transfer corporatist policy fails The flow of knowledge, not technology per se, is the very distinctive trait of technology transfer. To be effective, technology transfer needs, therefore, trustful and outward looking knowledge brokers. Trust is a critical component of the business formula for those who should build bridges in a field so subtle and ambiguous as that of transferring know how, know what, know why, know whom, know when. Vested interests-protecting groups in comparison with trust-promoting groups seem thereby to be having little success as technology transfer intermediaries. Knowing what a technology means in all its facets and how it can be transferred from its source to the exploiter is the broker's much-vaunted achievement. This implies that the broker is to be a "cross-pollinator" who handles a chain of interactions between different professional communities of knowledge practice (engineers, patent and business lawyers, business economists, distribution agents, et cetera) in different cultural contexts and countries. Care also must be taken of the interstices between them. The technology transfer policy in Lombardy, Italy, is an example of how corporatist policy fails most strikingly in this respect.
In a context of strong trusting relationships, which are cross-functional, cross-sectional and across borders, a threat for today's technology transfer intermediaries is that of foreordaining a conduct very similar to the behavior of professional corporations embedded in nation-states. From inheritance, past accomplishments and constrains by law, national professions are reluctant to be embarked in the process of becoming less restricted or limited in their scope. The attitude of each profession to keep it apart from the rest holds back the opening up of mutual interactions at home and, worse still, internationally. Professional corporations prefer speaking to themselves through their introverted (self-interest) vertical hierarchy instead of harnessing complementary competencies through extroverted (external to the corporation) collaborations with colleagues of another practice. It is thereby policy focus and execution that make or break technology transfer operations. Inasmuch as corporatist policy decisions concerning the arrangements for technology transfer are likely to be made within a frame of reference that fits with the organization and culture of professional corporations, technology transfer advancements are imperiled. 14. International knowledge policy: corporatist partnership versus co-operative partnership In most recent times, the international community, including the multi-lateral institutions, has drawn up guidelines in the hope of lending force to corporatist experiments in the international business arena. Instrumental in setting the trend for extending corporatism well beyond the nation-state have been, on the one hand, the European Union funding mechanism for programs and projects across EU countries, and on the other hand the UN Vision Project on Global Public Policy Networks. In both cases, the EU supranational corporatism and the UN global corporatism (Ottaway, 2001) have been acknowledged as the best policy framework for closing the EU and UN governance gaps. Besides, with the purpose of giving an appealing look, the unfashionable corporatism has been renamed "public-private partnership". As yet, public-private partnership policy has not tended to reflect alternative policy views. We cannot thereby lose sight of the fact that the innocent expression "public-private partnership" still turns out to be a corporatist arrangement of which government-backed agencies - a decisive instrument of political power in the corporatist states - are the most typical example. Indeed, ever since the Roosevelt's New Deal policymakers have been embracing the agency model as the most effective tool to foster regional development. Its detrimental consequences on the dynamism of the economy have been expounded in a previous paper (Formica, 2003a). Corporatist partnership boosts in the international community growth of the special-interest groups whose parochial interests were before kept within the limits of national borders. More than that, it spotlights a new type of vested interests: those represented by the non-governmental organizations. The overriding concern is that the static society imposed at the national level by corporatist groups could be reproduced by corporatist partnership at the international scale. As restrictive trade practices between the two World Wars engendered the collapse of trade, which added to the plight of industry, so today supranational and global forms of corporatism pose a growing threat to knowledge exchanges. There is a high level of risk that the knowledge economy can go off its expansionary trend owing to restrictive practices concocted by corporatist partnership agreements, with a view to exercising the most effective sway over the great trade routes of knowledge. Vested interests that corporatist partnership must accommodate impose a burden on the international circuit of the knowledge economy. International knowledge policy that favors supranational and global corporatism sets the stage for international institutions which can be likened to the Paterson's authoritarian "Society of Status" where "the individual is not recognized [and] a man is defined by his relation to the group, and is presumed to exist only by permission" (Paterson, 2003: 42). Corporatist privileges and subjection on an international scale, one would have to say. Co-operative partnership shows a very different nature. This form of collaborative individualism, which embraces the communities of knowledge innovation agents, is founded on the intelligence of individuals from diverse backgrounds, their interactions in socially heterogeneous groups and concentration on complying with the tasks required to structure the process of knowledge innovation, rather than on buying influence at the political market. In this respect, a workable knowledge policy framework is that which suits the requirements of a liberal "Society of Contract", where knowledge can flow most fluidly through free contracts. Thanks to the abolition of corporatist control over the international circuit of knowledge, those agents can mobilize knowledge in response to market signals not distorted by over-regulation and anti-free market practices. Hence the stream of knowledge flows unfettered from continent to continent. International and multi-lateral institutions cannot evade a decision that is bound to determine the course of the world economy for years to come. Inasmuch as the international community were to become committed to sustaining the emerging trend and accounting for the challenges of the knowledge economy, policymakers would be going to consider the principles of freedom, openness and institutional fluidity of co-operative partnership, as opposed to restriction, closeness and institutional thickness of supranational and global corporatism. We have entered a new age heralded by the 'Enlightenment' of the "knowledge in action" revolution. Policies built on corporatist group-state relations are not suitable for the conditions prevailing in this time. Corporatist countries - like Germany and Italy - are on secular growth downtrends. Knowledge innovation communities, which embody the principles of the free-market economy and whose application-minded agents can relate themselves more effectively to the knowledge economy than the corporatist groups, are on sustained trends of growth improvement. The greatest challenge firms face today, in the knowledge economy age, is that of being connected with knowledge innovation® agents in a meaningful way to enhance their capacity to handle innovation as the process to put knowledge into action. The economic policy that complies with this challenge contends that free makers of knowledge innovation® and free knowledge markets are corollaries, and hence embraces the principle of a light, free market-supporting regulation which prevents corporatist forces from disrupting the autonomous operation of the free market. This policy therefore aims at curbing the corporatist groups' power instead of meddling with them. It also makes clear that these groups cannot any longer rely on numerous central and local government subsidies to protect and promote vested interests. Corporatism hurts the knowledge economy, for the corporatist structure is the breaking of the rules of conduct that would allow the reaping of maximum advantage from the flow of knowledge. Yet, albeit it prevents adjustment to changing circumstances and thereby is ill suited to contexts marked by high levels of innovation, there is a Luddite reaction to knowledge progress made by free agents of knowledge innovation. It is the corporatist power that takes the lead in shaping knowledge policy to its liking. In Europe, the increasing involvement of regulators does not bode well for the knowledge economy. Policymakers first fail to see the relevance of knowledge innovation agents and further are skeptical about sound actions by them. Therefore, they do prefer a "safety first" approach based on the precautionary principle of a corporatist type of policy that shows little appetite for growth-promoting reforms without which advancements of the knowledge economy are doomed to be stifled. What is more, much-needed government plans to loosen laws and regulation protecting professional guilds and corporatist groups from competition are likely to be also smothered by some muscle-bound, home-state corporate giants, for regulation can be a useful barrier to competition. The needs of knowledge innovation communities and those of corporatist associations do not match. Free agents turn out to knowledge professionals who break away from the prevailing trend of corporatist routines seen from the medieval guilds up to today's professional corporations. These agents are interested in a type of policy relevant to the stimuli to change in accordance with new ideas that knowledge provides. They go with the flow of knowledge. Corporatist groups hold the contrasting view that changes would damage their status and power. They try to fight change and accordingly rely on the embodied principles of slow-moving times. Arm in arm with government rules, they take decisions about how professionals must be locked into particular roles and, therefore, channeled into their appropriate corporations (the compulsory association thereby barring outsiders and unknowns from practicing the profession or keeping them out of the loop), how members of professional corporations operate, how they set prices and even where they can sell their services. Economic policy that endorses corporatist pressures and disregards market signals cannot accommodate the higher potential of the knowledge economy. Professional corporations engrossed in their bureaucratic practice and attitude are not apt to seize the broader field of vision opened up by the knowledge economy nor to gain sight of the interdependence of the various branches of knowledge. The implications for public policy are clear. Corporatist policy is damaging to the efficient operation of knowledge markets and hence to the knowledge economy as a whole. Knowledge-relevant economic policy is that which empowers knowledge innovation agents. First and foremost in the consensually managed economies, where the intellectual and corporatist elites dread the restructuring that the free-economy and free-agent model brings in in its path, the time is ripe for a policy regime change that should unleash the flow of knowledge still hostage to the influence of vested interest groups. The value proposition of knowledge policy is that it helps shape a new market context in which a powerful step toward building a knowledge-intensive economy is taken by communities of free agents of knowledge innovation. By this view, the struggle of the free economy, which is a vehicle of knowledge innovation, against the closed economy, which debars the flow of energy, remains at the heart of the debate on knowledge-relevant economic policy. References Amidon, Debra M. (1997), "The Emerging Community of Knowledge Practice", Knowledge Inc.'s Executive Report on Knowledge, Technology and Performance, March Issue. Andersson, Fredrik C. A. (2000), Corporatism and Economic Performance, Working Papers, Department of Economics, Lund University, No. 21. Baumol, W. J. (2002), The Free-Market Innovation Machine, Princeton University Press, Princeton and Oxford. Chesbrough, H. (2003), "How to generate more innovation for less", Financial Times, Thursday August 7. Dingwall, R. (1996), "Professions and Social Order in a Global Society", University of Nottingham, paper prepared fro plenary presentation at ISA Woking Group 02 Conference, Nottingham 11-13 September. Donkin R. (2003), "Smoking chimneys shadow Silicon Valley", Financial Times, February 13. Drucker, Peter F. (1993), Management: Tasks, Responsibilities, Practices, HarperBusiness. Formica, P. (2003a), "Corporate Governance of Cluster Development Agencies: The Case for Market Orientation", in: Bröcker, J., Dhose, D., and Soltwedel, R., Innovation Clusters and Interregional Competition, Springer-Verlag , Berlin Heidelberg New York. Formica, P. (2003b), Industry and Knowledge Clusters. Principles, Practices, Policy, Tartu University Press. Hall, Peter A. and Soskice, D., editors (2001), Varieties of Capitalism: the Institutional Foundations of Corporate Advantage, Oxford University Press. Lloyd-Jones, S. (1994), Corporatism and the Development of Corporatist Ideologies in Spain and Portugal, cphrc Portugal's history on-line, www.cphrc.org.uk/essay/article9.htm Locke, R. (2002), "What is American Corporatism?", FrontPageMagazine.com, September 13. Nonaka, I. and Takeuchi, H. (1995), The Knowledge-Creating Company, Oxford University Press, New York-Oxford. OECD (2003), ICT and Economic Growth. Evidence from OECD Countries, Industries and Firms, OECD Science, Technology and Industry Directorate, Paris. Ottaway, M. (2001), "Corporatism Goes Global: International Organizations, NGO Networks and Transnational Business", Global Governance - Carnegie Endowment for International Peace, September. Paterson, I. (2003), The God of the Machine, Transaction Publishers, New Brunswick, New Jersey (originally published in 1943 by G. P. Putman). Rand, A, (1943), The Fountainhead, Bobbs-Merrill, Indianapolis. Saul, John R. (1994), The Doubter's Companion: A Dictionary of Aggressive Common Sense, Free Press. Saul, John R. (1995), The Unconscious Civilization. From Corporatism to Democracy, Penguin Books. Thurow, L. (1992), Head to Head: The Coming Economic Battle Among Japan, Europe, and America, William Morrow. Viale, R. and Ghiglione, B., (1998), The Triple Helix model: a Tool for the Study of European Regional Socio Economic Systems, Fondazione Rosselli. Watson, W. (2002), "Europe uber alles? Don't bet on it", National Post, September 24. Piero Formica's most recent publications include:
1 Knowledge Innovation® is a registered trademark of ENTOVATION International Ltd. Permission was granted by the principals to use the term throughout this paper 2 See "The Learning Age: a renaissance for a new Britain", Green Paper by the UK Secretary of State for Education and Employment, London 1998, and "Connected Intelligence Workshop" directed by Derrick de Kerckhove, Mediartech 1999, Florence, January 24-28, 1999. 3 Primo de Rivera's dictatorship in Spain (1923-1929) and Mussolini's Fascist Italy (October 1922- July 1943). Mussolini defined "corporatism" as the merger of government and corporations. | |||||||||||||||||||||
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