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S P R I N G E R B R I E F S I N E D U C AT I O N

Jomphong Mongkhonvanit

Coopetition for Regional Competitiveness The Role of Academe in Knowledge-Based Industrial Clustering

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Jomphong Mongkhonvanit

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Coopetition for Regional CompetitivenessThe Role of Academe in Knowledge-Based Industrial Clustering

Jomphong MongkhonvanitSiam UniversityBangkokThailand

Springer Singapore Heidelberg New York Dordrecht London

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Re-envisioning the function of higher education in the innovation economyIt is now commonly accepted, among higher education administrators and other members of the university community that higher education is in need of redefini-tion of its purpose. The forces driving such re-thinking of goals are varied. They include the growing demand for access to higher education, which in many places is inadequately served by the existing institutions and programs. They include also demands from employers, governments, and other stakeholders that the uni-versities more directly prepare students for productive roles, and to contribute to an innovation economy. They include, more generally, demands from various groups that universities become more transparent in the management of the sig-nificant resources entrusted to them, and more accountable to the various con-stituencies they serve for the contributions and the trust they receive from those constituencies. Some of the calls for re-examination of purpose have their origin in broader societal trends. One of them, the pervasive presence of telecommu-nication technology in our lives, which has generated new demands for skills to use it, as well as expanded the awareness of how much learning can be supported through the effective use of multiple technology-based formats. Another broad trend undergirding the calls for re-examination of the purpose of higher education is the awareness that globalization, with its greater rewards to the most educated, is contributing to increase economic inequality among nations and within nations. Greater economic inequality, in turn, translates into increases in inequality in the political voice of various groups of society, and can potentially undermine social trust, cohesion and governance, at least of the democratic kind. These broad trends of globalization, technology, and economic and social inequality in turn interact with raising aspirations of a new generation whose exposure to media of various kinds has shaped aspirations for voice and agency that are unprecedented in his-tory. It is no wonder that academic leaders should ponder their role in this new social context. Failure to find an appropriate response to the challenges, and the opportunities, caused by these trends, might, at best, render the higher educa-tion institutions they lead increasingly irrelevant, into organizational dinosaurs to be replaced by more adaptive institutional forms to satisfy those expectations for

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education, knowledge generation, and contributions to economic and social pro-gress. At worse, failing to understand the gravity of the existential predicament that higher education institutions are experiencing, might contribute to the possible set of social dislocations and political crises that could result from the failure of elites to construct a more inclusive social order, responsive to the economic, politi-cal, and environmental challenges most nations face.

In this context, this book by Jomphong Mongkonvanit offers a refreshing dis-cussion of the role of universities in the innovation clusters that are necessary to promote economic development. Drawing on a rich scholarship from various authors, Jomphong summarizes and discusses various theoretical perspectives to account for the relationship of universities to the productive sector, and also for the role of the State in intermediating this relationship. These models are engagingly examined with examples from various regions around the world. Jomphong then tests some of the ideas which are aptly discussed in the text as he applies them to examine the role of Thai universities in the automotive cluster. The results of this case study are discouraging. They show very weak links between higher edu-cation and industry, as a result of short sightedness on the part of economic and university elites alike. In showing the many missed opportunities in this economic cluster to live up to the potential of the robust partnership that the book had here-tofore discusses as possible, the book is indirectly documenting a significant fail-ure of Thai higher education institutions. The failure of educating entrepreneurial and innovative leaders, with a commitment to the long-term vision to construct the necessary linkages, that the book shows are essential to foster knowledge and innovation based economic development.

This book makes a valuable contribution to the necessary debate on the future of higher education in developing countries, and in Thailand more specifically, whilst developing coopetitive system of value creation and U-TECH framework to enhance their competitiveness. It will have served its purpose if it provokes and challenges, and hopefully in so doing it stimulates reflection and a dialogue that helps leaders of all sectors of society find pathways that create higher quality uni-versities, greater access, and more effective contributions of universities to eco-nomic development, and to a more inclusive social order, that allows all Thais the gift of living in peace with one another, and with the rest of the world.

Cambridge, USA Fernando M. Reimers

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In today’s turbulent and constantly shifting panorama of global affairs, most of the focus is on the political currents that are altering the dynamics of governance at the national and regional levels, of course with serious implications as well for international relations. Turmoil and instability are undermining the orderly process of governance in diverse countries, many of them democracies of various types—Turkey, Ukraine, Thailand, and Nigeria, to name a few—but also in other nations with recent histories of repressive authoritarian rule, such as Egypt, Libya, and Venezuela.

In such an atmosphere, it is often difficult to find public policy scholars who choose instead to focus on the underlying and more critical issues of economic development and innovation that present urgent challenges for the entire spec-trum of the world’s countries, whether highly industrialized or newly develop-ing. Jompong Mongkhonvanit’s new study of the potential for “co-opetition” (a term with roots in game theory that was first popularized by Brandenburger and Nalebuff in 1996) between academia, industry, and government helps to fill this gap by concentrating on the immediate imperative of the need for new models of economic development that can help to build the knowledge economy into a true engine of growth and prosperity.

Mongkhonvanit is a true pioneer and an innovator in his country, Thailand, in the area of higher education in the service of economic growth, and his prescrip-tions here, while solidly based in the theoretical realm, are practical and policy-oriented. He has brought his formidable personal experience as an educator to bear in constructing a vision of how the “triple helix” of academia, industry, and gov-ernment can nurture a successful confluence of resources, energies, and talents to build new networks of innovative and sustainable economic power.

In doing so, the author provides a useful review of global examples of this pro-cess and then offers a very detailed case study of his own design that examines the automotive industry in Thailand, where shrewd and effective measures have been taken in recent years to build a successful auto assembly complex in partner-ship with the globe’s major automakers from the USA, Europe, and Japan. He uses this to illustrate the potential of new approaches to the organization of industry

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that utilize new technologies, commercial networks, and management structures to establish a sector that has been one of the primary engines of Thailand’s economic growth. Not surprisingly, he is particularly eloquent on the role that Thailand’s universities and R&D institutes have played in this process, one in which he him-self has been a significant player.

This is policy scholarship of the highest order, both inspired and informed by the urgent and complex dynamics of global commerce, education, research, and governance. This book, written (as it were) from the trenches of economic policy innovation, can serve as a valuable guide for entrepreneurs, academics, and pol-icy-makers from around the world, and we are fortunate to have Mongkhonvanit’s insights as a guide.

Beijing, China Robin J. Lewis

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As knowledge has become a major factor of production in the current knowledge-based economy, ideas and intellectual capital have replaced natural resources and mechanical innovations that previously served as the driving force of economic growth. The notion in classical political economy that labor could be treated as homogeneous category was replaced by human capital theories stating the need for a broader concept of capital that includes the skills, knowledge, and know-how workers. Furthermore, the skills and knowledge that increase the capital yields of labor are believed to be from systematic investment. Thereafter, education and other work preparations have been recognized as a form of investment, rather than consumption. The creation of high knowledge and skill economy is seen as an evolutionary process of technological upgrading, compelling national governments and private sectors to invest in the workforce, and individuals to invest themselves, as the demand for technical, managerial, and professional “knowledge” workers increases and the demand for low skilled jobs declines. The high knowledge and skill economy has become a major driving force of national and regional com-petitiveness. National and regional competitiveness significantly depends upon the nature and speed of the processes by which knowledge and skills are formed and disseminated leading to the opportunities for innovation, development and production.

These developments features the “Knowledge Economy,” in which knowledge is acquired, produced, disseminated, and used effectively to enhance economic development. The successful transition to a knowledge economy often involves many elements such as long-term investment in relevant education, develop-ment of innovation capability, modernization of information infrastructure, and improvement of economic environment for market transitions. The World Bank has grouped these mentioned elements as the four pillars of the knowledge econ-omy: (1) an economic incentive and institutional regime that provides good eco-nomic policies and institutions promoting efficient allocation of resources and incentives for the efficient creation, dissemination and use of knowledge; (2) an educated and a skilled workforce continuously updating and applying skills to create and use knowledge; (3) an effective innovation system of firms, research

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centers, universities, consultants, and other organizations encouraging creation, application and assimilation of new knowledge to local needs; and (4) a modern and an adequate information infrastructure to facilitate the communication, dis-semination, and processing of information and knowledge (Chen and Dahlman 2004).

Along with Knowledge Economy, to enhance national and regional competi-tiveness, the Industrial Cluster framework provides tools for an understanding of regional development processes. Industrial Cluster was defined by Michael Porter (2008) as “concentrations of interconnected companies and institutions in a particular field represent a kind of new spatial organizational form in between arm’s length markets on the one hand and hierarchies, or vertical integration, on the other. A cluster, then, is a new way of organizing the value-chain. A cluster of independent and informally linked companies and institutions represents a robust organizational form that offers advantages in efficiency, effectiveness, and flexibility.” (Porter 1998, p. 78–79). Clusters generally lead to increased levels of productivity, growth, and employment. Clusters are often viewed as a process for promoting national, regional, and local economic competitiveness/development.

The Knowledge Economy and Industrial Cluster framework thus asserts that investment and interaction among key players (namely academe, industry and gov-ernment) are essential for the generation, adoption, application and use of knowl-edge in economic production to add value and increases probability of economic success in this competitive and globalized world economy. With the importance of knowledge and its features in the emerging economy, academe or tertiary edu-cation (referred to all post-secondary education including universities, technical training institutes, community colleges, etc) play central roles in enhancing eco-nomic growth through the different dimensions, especially educating workforce and enhancing effective innovation system.

Among policymakers, academia, and public-at-large, roles of academe or ter-tiary education have been discussed as they have been dynamic to serve the needs of place and time. Most universities and tertiary educational institutions, espe-cially those receiving either funds or supports from government are believed and expected to provide some sorts of public goods. There would be no need for public support if the outputs of a university are privately-owned. A survey in The Economist said “the university is not just as a creator of knowledge, a trainer of young minds and a transmitter of culture, but also as a major agent of economic growth: the knowledge factory, as it were, at the center of the knowledge econ-omy” (David 1997). Rajani Naidoo (2003), Carnoy (1994) and Mongkhonvanit (2009) argued that higher education plays vital roles in the knowledge-economy and industry by the production, dissemination and transfer of economically pro-ductive knowledge, innovation and technology. With emphasis on economic growth since the mid-twentieth century in which industrial and scientific revolu-tions played important roles in society, the priority of university and education has been shifted to become the contributor to knowledge, economy and innovation, while many argue that knowledge and skill becomes a key factor of production.

Preface xi

As industrial clusters were emerged as a mean to improve competitiveness of industry in global and knowledge economy, this book is to investigate the roles and frameworks of academe, or tertiary education, and their dynamics with other relevant players in development of industrial clusters and regional competitive-ness. The ten chapters in this book also feature frameworks, concepts, and case studies to understand the roles, dynamics, and development of coopetitive system of value creation among key players, namely academe, industry, and government, to enhance knowledge-based industrial cluster and regional competitiveness.

Jomphong MongkhonvanitBangkok, Thailand

References

Porter, M. (1998a). Clusters and competition: New agendas for companies, government, and institutions. On competition. Harvard Business School Press: Boston.

Porter, M. (1998b). Clusters and the new economics of competition (pp. 77–90). Boston: Harvard Business Review.

Porter, M. (2008). On competition. Boston: Harvard Business School Publishing.David, P. (1997). The knowledge factor: A survey of universities. The Economist, 4 October.Mongkhonvanit, J. (2009). Development of technological university model. Bangkok: National

Council of Education.

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Part I Knowledge-Based Economy and Regional Competitiveness

1 Knowledge Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Emergence of Knowledge Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Definition of Knowledge Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Knowledge Economy’s Industrial Definition . . . . . . . . . . . . . . . . . . . 5Knowledge Economy’s Occupational Definition . . . . . . . . . . . . . . . . 5Knowledge Economy’s Innovation-Related Definition . . . . . . . . . . . 6

Significant Changes Through the Emergence of Knowledge Economy . . . 7Economic Colonization in Knowledge Economy . . . . . . . . . . . . . . . . . . . . 10References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

2 Regional Competitiveness: Key Players in Industrial Cluster in Knowledge-Based Industrial Cluster . . . . . . . . . . . . . . . . . . 13Regional Competitiveness Defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13Clusters and Networks Towards Regional Competitiveness . . . . . . . . . . . . 13The Origin of a “Cluster” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15Clusters and Competitive Advantage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16Private Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17Academe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Part II Academe to Enhance Regional Competitiveness

3 Academe in Improving Knowledge-Based Regional Competitiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23Academe and Their Roles in Knowledge Economy . . . . . . . . . . . . . . . . . . 23

Contents

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What Then Is the Strategic Role that Tertiary Education Can Play in the Knowledge Era? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

4 Academes’ Functions Within Innovation System . . . . . . . . . . . . . . . . . . 29Academes’ Functions Within an Innovation System . . . . . . . . . . . . . . . . . . 29

Linear Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30Contrasting Norms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30Mode 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31Triple Helix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

5 Academe to Enhance Regional Competitiveness Through Industrial Cluster in Different Regions . . . . . . . . . . . . . . . . . . . . . . . . . . 35Academe and Regional Cluster Development . . . . . . . . . . . . . . . . . . . . . . . 35

Research, Innovation and Knowledge Transfer . . . . . . . . . . . . . . . . . 36Proximity Effect and Knowledge Transfer . . . . . . . . . . . . . . . . . . . . . 37High Skill: A Source of Competitiveness . . . . . . . . . . . . . . . . . . . . . 37University as Social Capital Provider in Collaborative Network . . . . 38Academe and Emergences of Regional Clusters . . . . . . . . . . . . . . . . 39Cambridge Cluster, United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . 40Waterloo, Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40Heidelberg, Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41Strait of Taiwan: Zhangjiang, China, and Hsinchu, Taiwan . . . . . . . . 42

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Part III ‘Coopetition’ Towards Regional Competitiveness

6 Academe-Industry-Government (A-I-G) Towards Regional Competitiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47The Evolution of Triple Helix of Academe-Industry-Government Framework in Knowledge Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47The Triple Helix Model of Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49Experience of the Academe-Industry-Government Framework in Various Regions and Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

United States of America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54Italy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55Latin America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56Thailand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

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7 Development of Industrial Cluster in Emerging Economy: Case Study of Academe–Industry–Government Partnership in Automotive Cluster of Thailand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61Research Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62University–Industry Partnership in Thailand’s Automotive Cluster . . . . . . 63

Thailand’s Automotive Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63University–Industry–Government Dynamics to Upgrade Thai Automotive Industry and Automotive Innovation System . . . . . . . . . . . . . 64

Technological Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64Universities in the Innovation System . . . . . . . . . . . . . . . . . . . . . . . . 65University–Industry Cooperation in Thai Automotive Industry . . . . 66

University–Industry–Government Cooperation to Further Improve Competitiveness of Thailand’s Automotive Cluster . . . . . . . . . . . . . . . . . . 72References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

8 U-TECH Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79U-TECH Framework’s Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84

9 “Coopetition” of Academe–Industry–Government: A Framework for Regional Competitiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85“Coopetition” or “Coopetitive System of Value Creation” Defined . . . . . . 85Network Coopetition Model 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90Network Coopetition Model 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90Network Coopetition Model 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

10 Academe in Coopetitive System of Value Creation for Regional Competitiveness: Success Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93Agglomeration Economies and External Effects . . . . . . . . . . . . . . . . . . . . 93Firm-Building Capabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94Managerial Workforce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95Supply of Highly Skilled Technical Workers . . . . . . . . . . . . . . . . . . . . . . . 95Connection to Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98

Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103

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Jomphong Mongkhonvanit is a Trustee and an Associate Professor of Siam University. He is the President of Siam Institute of Technology and the President of the Federation of Private Technological and Vocational Colleges of Thailand. Dr. Mongkhonvanit was an Advisor to Thailand’s Deputy Prime Minister in Economic Affairs and served in parliamentary committees on education policy. With interna-tional publications and books, Dr. Mongkhonvanit currently leads international and national research and development projects regarding human development, educa-tion policy, and competitiveness. Dr. Mongkhonvanit holds academic degrees from Harvard University, Columbia University, University of Wisconsin-Madison and University of Bath.

About the Author

Part I Knowledge-Based Economy and Regional Competitiveness

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Abstract This first chapter aims to examine concepts and context of the emerging Knowledge Economy, its essential characteristics and how it plays essential roles in changing and developing economies. Definitions, significant changes and eco-nomic colonization within the knowledge economy are to be discussed.

Keywords Knowledge economy · Globalization · Economic colonization

Emergence of Knowledge Economy

While knowledge features the application of data and information, knowledge has become a major driving force for economic growth in our current economy. The knowledge economy is emerging from two defining forces: the rise in knowledge intensity of economic activities and the globalization of economic affairs. The revolution of information and communication technology (ICT) is instrumental in bringing about greater knowledge intensity, globalization and technological changes accommodating the era of the knowledge economy. Meanwhile, globalization has been driven by additional instruments such as national and international deregulation to accommodate borderless trade/economic activity, international organizations/agree-ments and the ICT-related communications revolution. However, it is important to note that the term “Knowledge Economy” refers to not only an aspect of the economy, but also the overall economic structure and a combination of ongoing phenomena.

In economic terms, the central feature of the ICT revolution is the manipula-tion, storage and transmission of large quantities of information at very low cost. An equally important feature of these technologies is their pervasiveness. While earlier technological developments focused on particular products or industrial sectors, information technology is, rather, generic in that it has impacts on every sector of the economy: on both goods and services and on elements of the business chain, from research and development to production, marketing and distribution. This phenomenon involves both the increasing knowledge intensity within devel-opment arenas and the delivery of different products and services.

Chapter 1Knowledge Economy

© The Author(s) 2014 J. Mongkhonvanit, Coopetition for Regional Competitiveness, SpringerBriefs in Education, DOI 10.1007/978-981-287-149-7_1

4 1 Knowledge Economy

The other main driver of the emerging knowledge economy is the rapid globalization of economic activities. With globalization, economic, social and political connections across the globe have been deepening, widening and accel-erating, while economies across the world have been increasingly integrated. Different information technologies have been rapidly developed to serve a border-less society, and new post-Fordist work practices have widely been implemented (Castells 1996; Mongkhonvanit 2009). These developments, along with globaliza-tion, configure “the knowledge economy”, in which the capacity to compete in the world depends on the development of value-added products and services. There is evidence that the developments of high value-added products and services very much rely on knowledge and innovation.

In the most recent phase, globalization is characterized by rapid increases in the flow of foreign direct investment (FDI), other capital transfers, trade flows of goods and services, and transfer of technology. From these movements, two phenomena are identified. First, in recent years, FDI and other capital flows have grown more rapidly than the trade flows have, suggesting that the current phase of globalization is about capital movement rather than trade. Second, the flows of FDI, other capital movement, trade and technology are becoming increasingly interrelated.

These facts have an impact at the level of the individual firm, as firms are increasingly required to adapt to the global environment and adopt new strategies in order to deal with the new realities. Major competitors in all markets become multinationals, which enjoy the economy of scale and advanced expertise in the production of both goods and services. The growth of multinational corporations and the new nature of world trade, along with roles of various elements in globali-zation, are all contributing to the transformation of the global economy.

The central characteristics of globalization since the 1980s can be summarized in terms of impacts relating to the emergence of a global system enhanced by global institutions such as World Trade Organization (WTO), global market competition, ICT enhancing borderless communication, multinational organizations/agreements and a rationalization of economic activity, while the emergence of the knowledge economy can be characterized in terms of the increasing role of knowledge as a fac-tor of production and its impact on competitiveness.

Definition of Knowledge Economy

The knowledge economy is defined by the OECD as a system in which the pro-duction, use and distribution of information and knowledge are essential to the process of economic growth (OECD 1996). In addition, Brinkley (2010) defined the knowledge-based economy in three categories:

• Industrialsector’sdefinition:knowledge-intensiveindustriesandservices;• Occupational-baseddefinition:knowledgeworkers;• Innovation-relateddefinitions:thetransferofinnovationamongfirms/institutions.

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Knowledge Economy’s Industrial Definition

The knowledge economy is often thought of and sometimes referred to as the existence of knowledge-intensive industries that require ICT and a highly educated workforce. The industrial definition of the knowledge economy initially focused on manufacturing and often used research and development intensity as an indica-tor to distinguish among sectors of high, medium and low knowledge intensity. The definition has steadily expanded to include service industries that invest rela-tively little in research and development, but are intensive in employing ICT, inno-vations and a highly skilled workforce (Brinkley 2010: 14).

Knowledge Economy’s Occupational Definition

In terms of the knowledge economy’s occupational-based definition, knowledge workers are perceived to be needed across sectors due to the competitive environ-ment demanding skills and knowledge in organizations. However, there are some arguments over the definition of knowledge workers. Brinkley (2010) proposed that there are at least three ways in which we can define knowledge workers:

• Allthosewhoworkinthetopthreeoccupationalclassifications:managers,pro-fessionals and associate professionals;

• Allthosewithhighlevelsofskillsindicatedbyacademiccredentialsandotherqualifications;

• All those who perform tasks that require expertise, systematic thinking andcomplex communication skills with the assistance of ICT.

As Brinkley’s paper showed the essential nature of workers’ credentials and qualifications, the study fits the conventional OECD view that a key indicator to determine an investment in up-skilling the workforce and building knowledge is the share of GDP devoted to higher education. Regarding the definition of human skills, Levy and Murane (2006) divided human skills into five categories:

• Expertthinking:abilityandskillsofproblem-solvingwhensimple/directsolu-tions do not exist. Computers and ICT can not substitute for workers’ expert thinking but can assist through making useful information readily available;

• Complexcommunication:abilityandskillsof interactingwithotherpeople toacquire or convey information and persuade others. In this regard, examples of those who exploit much of this skill are managers, teachers and sales people;

• Routinecognitive:mentaltasks/skillscloselydescribedbyrules/orderssuchasroutines of processing application forms and claims. These tasks are often either substituted or assisted by computerization and ICT;

• Routinemanual:physicaltasksdescribedbyrules/order,suchasassemblylinework and packaging. These repetitive tasks, in many circumstances, can also be undertaken by programmed machines;

Definition of Knowledge Economy

6 1 Knowledge Economy

• Non-routinemanualtasks:physicaltasksthataredifficulttobeaccommodatedby simple rules/orders because they (including truck-driving and cleaning) require optical, cognitive and fine muscle control. Such jobs are unlikely to be assisted or replaced by computers.

Levy and Murane (2006) further applied these categories above to the US work-force between 1969 and 1998 and found that jobs requiring complex communi-cation had increased by nearly 14 %, while jobs requiring expert thinking had increased by over 8 %. All other jobs requiring routine cognitive tasks and manual tasks were in a declining stage of employment over the same period. There was also a large-scale survey carried out by surveying American top companies’ execu-tives and managers using a similar approach to identify set of skills that will be most valuable in terms of competitive advantage in the year 2020. The adopted five categories used in the survey that indicate the essence of knowledge factors are:

• Complexknowledge-basedroles thatareprimarilyoutwardfacingandrequiredeveloped communication and judgment skills;

• Complexknowledge-basedrolesthatareprimarilyinwardlookingandrequiredeveloped communication and judgment skills;

• Simpleknowledge-basedroles thatare rules-basedandoutwardfacinganddonot require developed communication and judgment skills;

• Simple knowledge-based roles that are rules-based and inward facing and donot require developed communication and judgment skills;

• Productionrolesdirectlyrelatedtomanufacturingorproductionprocesses.

Knowledge Economy’s Innovation-Related Definition

Another way to define the knowledge economy is to look at the share of output or employment among firms that introduce new innovations in either process or product. The OECD has adopted a similar approach through three groups of indicators designed to capture three closely related innovation measures: the generation of new knowledge, industry–science linkages and diffusion of industrial innovation and tech-nology (Freudenburg 2003):

• Indicators of new knowledge generation: research and development per-formed by the non-business sector as a share of GDP; non-business researchers per 10,000 labour force; basic research as a share of GDP; PhD graduation in science, engineering and health; scientific or technical articles per million of population;

• Indicatorsof industry–sciencelinkages:researchanddevelopmentfinancedbybusiness sectors and public sector as a percentage of GDP; scientific papers cited in US-issued patents; publications in the nineteen most industrially rele-vant scientific disciplines per million of population;

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• Indicators of industrial innovation: business-funded R&D as a share of GDP;commercial researchers per 10,000 labour force; patents in “triadic” patent families per million of population; share of firms with new or technologically improved products and processes.

The OECD’s study cited in Brinkley (2010) found that the generation of new knowledge strongly correlates with industrial innovations and moderately cor-related with industry–science linkages. This paper showed that the standard defi-nition of innovation excluded two other forms of innovation described by the Community Innovation Survey (CIS): “organizational innovation” regarding inno-vation around work settings and business practices and “presentational innova-tion” covering design and marketing. The survey found a close linkage between these two forms of innovation; in other words, firms that have organizational inno-vation are more likely to accommodate presentational innovation as well. These “softer” innovations (strategy, management, organization, marketing and aesthetic) may be another key distinctive feature of the knowledge economy, especially around the introduction of knowledge management practices.

Apart from the specific practices/skills enhancing the knowledge economy mentioned above, there is the emergence of knowledge management deploying an effective use of ICT to analyse, process and share information and knowledge among knowledge workers. “Knowledge management” practices aim to describe how organizations track, measure, share and make use of both explicit (codified) and tacit (implicit) knowledge. The OECD identifies the following as key knowl-edge management practices:

• Creatingaknowledge-sharingculture;• Developingpolicyonincentivetoretainknowledgeemployees;• Buildingalliancesforsharing/acquiringknowledge;• Writingknowledgemanagementpolicy.

Not only are such practices becoming widespread, but also there is an association of such practices with innovation and productivity.

Significant Changes Through the Emergence of Knowledge Economy

The emergence of the knowledge economy has made significant changes in the industrial economy. Those shifts are as follows:

First, the information revolution has intensified knowledge codification and increased the exchange/transfer of codified knowledge within the knowledge stock of advanced economies. Codification and the transfer of knowledge also reduce the additional and duplicative investment in acquiring similar knowledge. They create bridges among fields and areas of competence and reduce the scattering of knowledge.

Definition of Knowledge Economy

8 1 Knowledge Economy

Second, flexible organizations enhanced by new ICT, other innovations and competition are driving and shaping globalization today by merging flexibility, high product quality and a degree of customization with the speed and low unit costs of mass production. Flexible organizations can reduce waste and increase the produc-tivity of both labour and capital by integrating “thinking” and “doing” at all levels of their operations. In doing so, they eliminate many layers of middle management, which are dysfunctional in terms of information flow. They also avoid excessive specialization and compartmentalization by defining multitask job responsibilities (which calls for multiskilled workers) and by using teamwork and job rotation.

Third, investment in knowledge, learning/skills and ICT are complementary with investment in human resources and skills. The skills required in the workforce will increasingly be complementary, rather than being substitutes, with informa-tion and communication technology. The information technology will be the locus of codified knowledge in the knowledge economy, while work in the knowledge economy will increasingly demand human and tacit skills.

Fourth, regarding innovation and knowledge networks, the knowledge economy is driven by a hierarchy of networks and acceleration of the rate of change and the rate of learning, while the opportunity and capacity to get access to and join know-ledge-intensive and learning-intensive networks determine the opportunity and socio-economic position of individuals and firms. Thus, firms compete to become learning organizations that continuously adapt management, organization and skills to accommodate new technologies and grasp new opportunities.

Fifth, according to learning organizations and innovation systems in a knowl-edge economy, firms will search for linkages to promote inter-firm interactive learning and relationships with outside strategic partners and networks to provide complementary assets. These relationships help firms reduce the costs and risks associated with innovation, gain access to new research findings, acquire key tech-nological components and share assets/knowledge in manufacturing, marketing and distribution. With the development of new products and processes, firms deter-mine which activities they will undertake individually, which will be the result of collaboration with other players/firms, which will be from collaboration with uni-versities or research institutions and which will be from the support of government (OECD 1996: 16). Innovation often comes from the flows and relationships which exist among industry, government and academia in the development of science and technology. The “knowledge distribution power ” of the system, or its capability to ensure timely access of innovators to relevant stocks of knowledge, is therefore a major determinant of prosperity (OECD 1997).

Sixth, regarding global competition and production in the new environment, competitiveness depends increasingly on the coordination and synergy generated among a broad range of specialized industrial financial, technological, commer-cial, administrative and cultural skills/capacities which can be located anywhere around the world.

Seventh, production is being globally relationalized, with firms combining the factors, features and skills of various locations in the process of competing in global markets. Globalization is fundamentally a collection of microeconomic

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phenomena, driven by the strategies and behaviour of different players. In a global strategy, the comparative advantages of each nation, state and location are no longer separately considered. Comparative advantages of a location rather rely and are deployed on a firm’s global strategy due to ICT, knowledge transfer, speed of change and capital flows. Nations, states and locations need to achieve the development of coherent sets of advantages and find a niche in global market with the economic activity they would like to foster.

Eighth, regarding clustering in the knowledge economy, networks and geo-graphical clusters of firms are a particularly important feature of the knowledge economy. Firms find that it is increasingly necessary to work with other firms and institutions to form strategic alliances because of the rising cost, increasing com-plexity, intensive competition and large scope of technology. Despite improved capability for communication, firms increasingly co-locate because it is the most efficient and effective way to share understanding and tacit knowledge.

Ninth, knowledge has fundamentally different characteristics from ordinary commodities and these differences have crucial implications on how the knowledge economy has been organized. Indeed, ideas and information exhibit very different characteristics from the goods and services of the industrial economy. While tra-ditional commodities could not be shared and reused and the cost of production are different over time, the social values of ideas and information can be endlessly shared with and reused by different others. More importantly, the reproduction and utilization of ideas and information are almost at no cost, while reproduction of traditional commodities does not cost much less due to the use of materials and production process. While upfront costs associated with the production of tra-ditional goods such as a car or house may not necessarily be high, each item is still costly to produce. The more of these one produces, the more likely one will eventually encounter scarcities that drive up production costs and reduce the size of social returns. In the case of innovation, ideas and information, however, the oppo-site would seem largely to be the case. While upfront development costs can be very high, the reproduction and transmission costs are low. The more such items are reproduced, the greater the social return on investment.

Traditional economics is founded on a system which seeks to optimize the effi-cient allocation of scarce resources. However, because of the unique characteris-tics of information and knowledge, the meaning of scarcity in knowledge goods and services is changing. Indeed, the scarcity-defying expansiveness of knowledge is the root of one of its most important defining features.

Once knowledge is discovered and made public, there is essentially zero marginal cost to adding more users. Knowledge can add value to an otherwise closed, zero-sum system of value. It can increase value without diminishing it somewhere else. In addi-tion, knowledge goods have extensive externalities in which their benefits extend well beyond those who first put them forward, while it can be difficult to exclude other potential users of knowledge through intellectual property rights. Hence, social return on investment in knowledge and its generation can be multiplied through its diffusion.

Tenth, regarding systems of creation, production and distribution, Houghton and Sheehan (2000) write that the commonly held notion that a knowledge

Significant Changes Through the Emergence of Knowledge Economy

10 1 Knowledge Economy

economy comprises only the service economy is misleading. They explain that information and knowledge adding value to basic manufacturing of products and services are becoming increasingly integrated into complex chains of creation, production and distribution. There is rather an essential impact of the knowledge economy and innovation on the value chain of a commodity’s production, con-struction, energy, distribution and other industries.

Eleventh, Houghton and Sheehan (2000) argue that one of the features of the emerging knowledge economy is increasing evidence that the nations of the world are polarizing, rather than converging, in economic terms. Countries appear to be moving towards either pole: one of high incomes and the other of relatively low incomes. This polarization of countries into different strata of economic activity and of living standards is becoming both pronounced and persistent.

Twelfth, there is increasing inequality that can be observed at the international, national, regional, household and personal levels. In other words, the rich are get-ting richer, while the poor are getting poorer. Some economists suggest that the increasing return from network economies and learning economies characterizes the knowledge economies. Others contend that there is an expansion of the knowledge -driven economy leading to a proliferation and an increase of materials, firms and activities at all levels and all periods. This view suggests that there is much smaller opportunity for one to enjoy continuing control of markets.

From the items above, we can summarize the key features of the knowledge economy and its players as follows:

• Theknowledgeeconomyrepresentsa“soft discontinuity” from the past through the rising essence of knowledge as a factor of production. It is important to note that the knowledge economy is not a completely “new” economy requiring a new set of economic laws;

• The knowledge economy is represented not only in the knowledge-intensiveindustries or service industries, but also in all sectors of the economy;

• The knowledge economy has a high and growing intensity of ICT usage bywell-educated and skilled workers;

• A growing share of Gross Domestic Product (GDP) is devoted to producingintangible knowledge, relative to that of physical capital;

• Theknowledgeeconomyconsistsof softer innovations suchasorganizationaland presentational innovations;

• The development of knowledge-based organizations requires them to handle,store and share information through knowledge management practices.

Economic Colonization in Knowledge Economy

As I mentioned in the eleventh and twelfth points of the section above, it appears that the knowledge-based economy could have negative impacts on developing and underdeveloped countries. Globalization and the knowledge-based economy could be seen as the way powerful Western countries are to retain and increase

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their economic and political power, and many have called globalization the new form of economic colonization. As evidenced throughout the world, economically powerful countries often exploit underdeveloped and developing countries through accessing their resources and low-cost labour to further accumulate wealth. International financial institutions such as the International Monetary Fund (IMF) and the World Bank, along with European and US policy makers, have preached “market fundamentalism” to the Third World—elimination of trade barriers, sub-sidies for local products and protective regulations for products and services. Economically, well-off countries have allowed their multinationals to capitalize market opportunities in targeted developing countries accommodating market fun-damentalism, while protecting their domestic economic sectors (Petras 2002).

To maintain their exploitation of resources and low-skilled/low-cost labour, multinational corporations do not transfer technology and skill to their host coun-tries. Thus, it is impossible for underdeveloped and developing countries to be equal partners and to become competitively developed.

Several researchers throughout the world found that this foreign capital pen-etration exacerbates income inequality between rich and poor (Alderson and Nielsen 1999; Beer 1999; Bornschier and Ballmer-Cao 1979; Bornschier and Chase-Dunn 1985; Bornschier et al. 1978; Evans and Timberlake 1980). The argument here is fourfold. First, reliance on foreign investment distorts the class structure of the host country by generating a small, highly paid class of elites to manage these investments and expand the tertiary and informal sectors of the economy. In the meantime, the majority of the employment generated by these investments is likely to be in low-wage jobs. Second, profits from these invest-ments are repatriated, rather than reinvested in the host country, inhibiting domes-tic capital formation. Third, foreign capital penetration tends to switch land and property ownership from domestic to foreign entities. Finally, host countries are likely to create political and economic climates favourable to foreign capital that inhibit domestic labour from obtaining favourable wages and better working conditions.

From the “divergence” perspective of Cook and Kirkpatrick (1997), the experi-ence of low-income economies, particularly in sub-Saharan Africa, provides evi-dence that globalization leads to the widening of existing international disparities and a further marginalization of the majority of developing countries’ role in the world economy.

In addition, low-income countries have faced a change in political economy and challenge due to the behaviour and structure of multinational corporations that underline the globalization of investment and trade flow. A major change of organi- zation in host countries has been the shift in industrial organization from Fordist mass production to the global, flexible specialization paradigm. These changes have, in turn, been related to the increased importance of knowledge-based inputs to production and intra-firm organization, relative to labour cost that has been the key to competitiveness of low-income economies.

In conclusion, Knowledge Economy has emerged, in which the capacity to compete in the world depends on knowledge and innovation to deliver value-added

Economic Colonization in Knowledge Economy

12 1 Knowledge Economy

products and services. The transition to knowledge economy usually involves many developments such as long-term investment in relevant education, innova-tion capability, information infrastructure and economic environment for market transitions. However, in knowledge economy, developing and underdeveloped countries might have negative impacts due to economically powerful countries’ exploitation on their resources and low-cost labour. This might be called economic colonization, in which some underdeveloped and developing economies have been developed under exploitation, economic influence and control of the other devel-oped economies.

References

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Mongkhonvanit, J. (2009). Development of technological university model. Bangkok: National Council of Education.

Houghton, J., & Sheehan, P. (2000). A primer on the knowledge economy. Victoria: Center for Strategic Economic Studies, Victoria University.

OECD. (1996). “Special Theme: The Knowledge-Based Economy”, Science, Technology and Industrial Outlook. Paris: Organization for Economic Co-operation and Development.

Brinkley, L. (2010). Defining Knowledge the Economy: Knowledge Economy Programme Report. London.

Levy and Murane. (2006). How Computerised Work and Globalisation Shape Human Skill Demands. MIT.

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OECD. (1997). Towards a new global age. Paris: OECD.Petras, J. (2002). The myth of the third scientific-technological revolution in the era of neo-mer-

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Evans, P., & Timberlake, M. (1980). Dependence, inequality and the growth of the tertiary: a comparative analysis of less developed countries. American Sociological Review, 45, 531–551.

Cook, P., & Kirkpatrick, C. (1997). Globalization, regionalization and third world development. Regional Studies, 31(1), 55–66.

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Abstract While the first chapter examined the concept and features of Knowledge Economy, this chapter’s objectives are to explore the framework of Industrial Cluster in Knowledge Economy and its key players (government, private sector and academe) that are to enhance Regional Competitiveness.

Keyword Regional competitiveness · Industrial cluster · Knowledge economy

Regional Competitiveness Defined

Regional Competitiveness is often emphasized on the comparative advantage of such region in a particular country. A competitive region is one that attracts and maintains achieved companies, while improving inhabitats’ standard of living. Skilled workforces, regional resources and investments are often drawn to a com-petitive region. Storper (1997) defined regional competitiveness as “…the ability of an economy to attract and maintain firms with stable or rising market shares in an activity while maintaining or increasing standards of living for those who participate in it”. Kitson et al. (2004) added that “…ultimately competitive regions and cities are places where both companies and people want to locate and invest in”. To enhance regional competitiveness of a region, the regional comparative advantage could thus be drawn by different factors such as human resources, finan-cial resources, infrastructure, innovation, natural capital and community support.

Clusters and Networks Towards Regional Competitiveness

In research into the knowledge-based economy, the concept and practices of clus-ters and networks have received continuous attention in recent years, not only as an instrument for regional development and competitiveness, but also as instruments enhancing knowledge creation, dissemination and transfer through the knowledge

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infrastructure of a region and the interaction of different players (including firms) within an industrial cluster (Cantwell, in DTI 1999; Devol 1999: 9). Clusters are, therefore, often regarded as geographically condensed forms of economic cooperation and knowledge exchange that encourages regional competitiveness (Steiner 2004).

Much interest in the concept of clustering was sparked by the work of Porter (Porter 1998a, b) of the Harvard Business School. Bergman and Feser (1999) explain that most cluster studies use Porter’s work as a framework for clus-ter analysis. Porter (2008) defines clusters as “concentrations of interconnected companies and institutions in a particular field…[which] represent a kind of new spatial organizational form in between arm’s length markets on the one hand and hierarchies, or vertical integration, on the other. A cluster, then, is a new way of organizing the value-chain… A cluster of independent and informally linked com-panies and institutions represents a robust organizational form that offers advan-tages in efficiency, effectiveness, and flexibility” (Porter 1998a, b: 78–79). While the Department of Trade and Industry (DTI), UK (1998: 22) defines the cluster as “…a concentration of competing, collaborating and interdependent companies and institutions which are connected by a system of market and non-market links”, Scottish Enterprise (1998) defines clusters as “…customers, suppliers, competitors and other supporting institutions such as universities, colleges, research bodies, financial institutions and the utilities”.

The cluster framework provides tools for an understanding of regional devel-opment processes. Clusters generally lead to increased levels of competitiveness including productivity, growth and employment (Porter 2008; Feldman 2000). Clusters are often viewed as a process for promoting national, regional and local economic competitiveness/development.

Saxenian’s work (1996) focuses on the concept of regional advantage to pro-mote regional/cluster networks for developing network-based industrial system. The policies on cluster facilitate innovation and support multidisciplinary research networks among industries and academics through information and knowledge exchange/transfer. Clusters are also a practical means of linking research to mar-ketable innovations.

In addition, Sexenian (1996) asserts the importance of “knowledge externali-ties” on the economics of regional clusters. The emphasis on knowledge reflects the declining relative importance of material input in various manufacturing industries, the increasing roles of service industries and their increasing nature of having similar costs everywhere.

In order to explain the continued essence of “localized knowledge spillovers”, most literatures and works invoke the concept of “tacit knowledge”. Audretsch (1995) puts it, “The propensity for innovative activity to cluster spatially will be the greatest in industries where tacit knowledge plays an important role… it is tacit knowledge, as opposed to information, which can only be transmitted infor-mally, and typically demands direct and repeated contacts” (Audretsch 1995, p. 23). Tacit knowledge cannot be expressed by words and is highly contextual, unarticulated. It can be transferred only through experiences, face-to-face inter-action or through individuals’ physical movement. Tacit knowledge is obtained through local networks that develop “localized knowledge” delivering “codified

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knowledge” (knowledge in writing or other code and does not require personal contact for transmitting) and “tacit knowledge” (as Polanyi 1966, p. 4, puts “we can know more than we can tell”).

In short, firms and actors within an industrial cluster could be benefited greatly through being belonged to the related or complementary epistemic communities existed around the specific professional practices’ exercise. Respected communi-ties share both the explicit and the tacit elements of knowledge informing their prac-tices. Proximity, with shared codes, tools, theories and understandings, facilitates the exchange and transfer of knowledge, ideas, practices and innovation.

The depth and breadth of clustering have increased as the market competition, and economies have evolved in complexity. Globalization, together with rising knowledge intensity, has greatly supported the role of clusters in competitiveness. Porter introduces a concept of clusters because he feels that sustained industrial growth has hardly ever been built on basic inherited factors (land, location, natural resources, labour and local population size), as traditional economic theory main-tains, and abundance of such factors may actually not deliver competitive advan-tage (Porter 2008).

The Origin of a “Cluster”

Clusters emerged through various means. In many cases, pioneering companies/institutions spin off other companies, or employees leave the pioneering compa-nies to establish other firms in the same locality. For example, the birth of Silicon Valley is associated with the departure of eight disappointed employees from Shockley Semiconductor Laboratories in Mountain View California to establish Fairchild Semiconductor. In some other cases, public sector investment and pub-lic research laboratories have spawned clusters. For example, the US National Institutes of Health (NIH) in Maryland and their laboratories sparked the emer-gence of the biomedical cluster. Sometimes unexpected and precipitating events or historical events or circumstances cause cluster to rise. The Fiat tractor factory in Modena in the 1950s, for example, resulted in a local economy of small producers in the mechanical sector (Andriani et al. 2012: 9).

The facilitative conditions that improve the opportunities of cluster formation are a specialized labour force, a technological or market opportunity, and ready access to customers and market channels.

Clusters and Competitive Advantage

It is widely recognized that most cluster studies use Porter’s works and Porter’s model of national competitiveness—the so-called Diamond Model—as a starting point for cluster analysis. The analysis looks at clusters where one company’s competitive-ness is related to other companies’ and other factors in the value-added chain. The

Clusters and Networks Towards Regional Competitiveness

16 2 Regional Competitiveness: Key Players…

Diamond Model, as sources of locational or regional competitive advantage, is divided into four factors that become key instrument for the analysis of competitiveness:

• Factor conditions: factors are human resources, physical resources, knowledge resources, capital resources and infrastructure. Specialized resources are spe-cific for an industry and important for its competitiveness.

• Demand conditions: demand in the local and regional market can enhance com-panies a competitive advantage, when sophisticated local and regional customers demand firms to innovate more advanced products than those of competitors.

• Related and supporting industries: other related and supported industries are important for innovation and competitiveness in global market. These industries could provide cost-effective inputs and upgrading procedure.

• Context for strategy and rivalry: strategy, objective and management of com-panies are essential for their success. Presence of intense rivalry in the local and regional market could provide pressure to innovate in order to improve competitiveness.

The Diamond Model brings about competitive advantage in at least three dimen-sions. First, companies can operate with a higher level of efficiency, drawing on more specialized assets and suppliers with shorter reaction times than they could in isolation. Second, companies and research institutions can achieve higher levels of innovation and knowledge sharing. Knowledge spillovers and close interaction with customers and other companies create more new ideas and provide pressure to innovate, while the cluster environment lowers the cost of experimenting. Third, the level of business formation tends to be higher in clusters. Start-ups are more reli-ant on external suppliers and partners, all of which they find in a cluster. Clusters also reduce the cost of failure, as entrepreneurs can fall back on local employment opportunities in many other companies within the same field (Ketels 2003d).

The evolution of the cluster concept leads to the determination of the role of private sector, government, trade associations, and educational or research institu-tions. It builds a new model of collaboration between government, private sector, universities and research institutions. The new/adapted roles of each player in a cluster-based economic development are as follows:

Government

Ketels (2003d) applied Porter’s Diamond Model to clarify the role of government in cluster-based economic development. He explained the four interrelating and influential roles of government in competitiveness:

Roles in factor conditions: to create specialized education and training pro-grammes; to establish local university research efforts enhancing cluster-related technologies; to support cluster-specific information gathering and compilation; and to improve specialized transportation, communications and other infrastructure required by such clusters.

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Roles in context for strategy and rivalry: to eliminate barriers to local com-petition; to focus on efforts to attract foreign investment around clusters; to focus on export promotion around clusters; and to organize relevant government depart-ments around clusters.

Roles in demand conditions: to create pro-innovation, regulatory standards encour-aging demand conditions (i.e. reduce regulatory uncertainty, stimulate early adoption of regulation, and encourage innovation or new products and processes); to sponsor inde-pendent testing, product certification and rating services for a cluster’s products and services; and to act as a sophisticated buyer of the cluster’s products/services.

Roles in related and supporting industries: to sponsor forums to bring together cluster participants; to attract suppliers and service providers from other locations; and to establish cluster-oriented free trade zones, industrial parks or supplier parks.

In order to succeed in cluster-based development, Ketels (2003a, b, c) suggested the important role of government at each level.

Federal: the government should set the context through macroeconomic policy and microeconomic regulations, upgrade business environment conditions under national control and enable regional competitiveness efforts.

State: the government should initiate and facilitate state and cluster competi-tiveness efforts, upgrade business environment conditions under state control and support local competitiveness efforts.

Local: the government should participate in regional and cluster competitive-ness efforts and upgrade business environment conditions under local control.

Private Sector

Ketels (2003d) analysed the role of private sector influences on upgrading the clus-ter by using the four interrelated influences of the “Diamond Model” as follows:

Roles in factor conditions: to jointly develop specialized curricula of vocational, technical, college and university education to serve the relevance, to sponsor special-ized university research centres, to collect cluster information through trade associa-tions and to maintain close liaison with infrastructure providers to address clusters’ needs (i.e. data communications, logistics); and to develop courses for managers on regulatory, quality and managerial issues.

Roles in context for strategy and rivalry: to support the market jointly through trade fairs and delegations, collaborate with government export promotion efforts, and to create directories of cluster participants.

Roles in demand conditions: to work with government to streamline regulations and modify them to encourage innovation, and to establish local testing and standards organizations.

Roles in related and supporting industries: to establish a cluster-based trade association, to encourage the formation of local suppliers and to attract local investments through new suppliers, individuals and collective efforts.

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18 2 Regional Competitiveness: Key Players…

Academe

Academe or tertiary education is broadly referred to all post-secondary educa-tion. Universities are definitely an essential part of the tertiary educational system. There are, however, other types of institutions both private and public, namely colleges, technical training institutes, community colleges, research laboratories, centres of excellence, distance learning centres and many more. Many of those establish a network of institutions that support community and industrial demand.

In cluster-based economic development, Ketels (2003a, b, c) analysed the role of tertiary education by stating that tertiary education and non-profit research insti-tutions need to actively cooperate with co-located companies and other institutions to pursue their role as a part of cluster and an engine of the regional growth/busi-ness development.

The key roles for tertiary education and universities are to generate knowledge/innovation, to transfer knowledge/innovation to firms and their workforce, to develop a workforce that is competent in relevant skills, to attract new investments due to positive externalities, and to facilitate the players/enhancers of competitiveness. Thus, tertiary education and universities that become more engaged in the develop-ment of their regional business environments could lead to direct benefits to the clus-ter. In addition, universities attract faculty members and students providing positive impact on research, education and workforce of the region. The roles of academe and tertiary education in knowledge-based regional development will be further ana-lysed and explained in next part of this book, Part II (Chaps. 3, 4, and 5).

In conclusion, regional competitiveness is emphasized on skilled workforces, regional resources and investments leading to comparative advantages of such region, which attracts and maintains growing companies and industries. Clustering concept, popularized by the work of Porter (1998a, b), has played essential roles in explaining locational competitive advantage of a region, when companies and actors in such region could be benefited through being belonged to complementary epistemic communities. Lastly, it is important for different players in value-added value chain—namely government, industry and educational sector—to collaborate for the benefits of such regional cluster and actors belonged to.

References

Andriani, P. et al. (2012). The cluster effect: How clusters policy can make the UK more competi-tive. Executive Briefing. London, U.K.: Advanced Institute of Management Research (AIM).

Audretsch, D.B. (1995). Innovation and industry evolution. Cambridge, MA: MIT Press.Bergman, E., & Feser, E. (1999). Industrial and regional clusters: Concepts and comparative

application. VA: Regional Research Institute, West Virginia University.Department of Trade and Industry. (1998). Our competitive future: Building the knowledge

driven economy. London: Department of Trade and Industry.DeVol, R. (1999). America’s high-tech economy: Growth, development and risks for metropoli-

tan areas. Santa Monica: Milken Institute.DTI. (1999). Economics of the Knowledge Driven Economy, Conference Proceedings, Department

of Trade and Industry, London.

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Enterprise, Scottish. (1998). The clusters approach: Powering Scotland’s economy into the 21st century. Glasgow: Scottish Enterprise.

Feldman, M. (2000). Location and innovation: The new economic geography of innovation, spill-overs and agglomeration. In G. L. Clark, M. Feldman & M. Gertler (Eds.), Oxford handbook of geography. Oxford: Oxford University Press.

Ketels, C. (2003a). Cluster-based economic development. Presentation paper. Available at: http://www.isc.hbs.edu/pdf

Ketels, C. (2003b). Thailand’s competitiveness: Key issues in five clusters. Presented to the Royal Thai Government, 4 May 2003, Bangkok, Thailand.

Ketels, C. (2003c). The development of the cluster concept—present experiences and further developments. In Research paper. Available at: http://www.isc.hbs.edu/pdf.

Ketels, C.H.M. (2003d). Cluster-based economic development, 17p. http://www.Caps.am/data.php/859.pdf

Kitson, M., Martin, R., & Tyler, P. (2004). Regional Competitiveness: An elusive yet key con-cept? Regional Studies, 38(9), 991–999.

Polanyi, M. (1966). The tacit dimension. Garden City, NY: Doubleday.Porter, M. (1998a). Clusters and competition: New agendas for companies, government, and

institutions. In On competition. Boston: Harvard Business School Press.Porter, M. (1998b). Clusters and the new economics of competition. In Harvard business review,

pp. 77–90 (November–December).Porter, M. (2008). On competition. Boston: Harvard Business School Publishing.Sexenian, A. (1996). Regional advantage. Cambridge, MA: Harvard University Press.Steiner, M. (2004). The Role of clusters in knowledge creation and diffusion—and institutional

perspective. In Joanneum research, in 44th European Congress of the European Regional Science Association. Graz: University of Graz.

Storper, M. (1997). The regional world. New York: The Guilford Press.

References

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Part II Academe to Enhance Regional

Competitiveness

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Abstract This chapter features vital roles of academe (tertiary educational institu-tions), as an important player in economy and society, to enhance regional com-petitiveness in the knowledge economy.

Keywords Academe · Knowledge economy · Regional competitiveness

Academe and Their Roles in Knowledge Economy

From the literature on the knowledge economy, the economic competitiveness of a country does not necessarily depend on vast natural resources, a large popula-tion and physical capital, although having these assets and resources is certainly beneficial. It is the quality of human capital and the ability of a nation to generate innovations and effectively exploit new ideas and inventions on the global market that are now critical for a country’s economic growth.

What Then Is the Strategic Role that Tertiary Education Can Play in the Knowledge Era?

Tertiary educational institutions, including universities, need to respond to the chal-lenges of the knowledge era by strengthening their roles in the areas of knowledge dissemination, creation and application. This has implications for undergraduate education, postgraduate study/research and continuing education/training.

First, in post-secondary and undergraduate education, universities and other tertiary educational providers have to expose students to a broader range of skills, in order to prepare them for workplaces that need a multidisciplinary and sys-tematic approach in problem-solving. For postgraduate education and research, the university aims to make a greater impact on economy and society through

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24 3 Academe in Improving Knowledge-Based Regional Competitiveness

new ideas, knowledge and innovation. It is in postgraduate education that the role of university and other tertiary educational institutions in knowledge creation becomes very essential.

Second, in term of universities’ research, universities must carry out research with high impact in different sectors and levels of development. The university constitutes a significant resource of new ideas and inventions with the potential for commercial applications. It is also collaborating with national research insti-tutes and centres, and strengthening links with industry through joint projects in high-technology cutting-edge research. With the move to a knowledge economy, universities are now part of the whole value generating chain of the economy. The time has now come to strengthen the role of the universities as engines of innova-tion and entrepreneurship. In particular, universities with substantial science-and-technology-based teaching and research staff and students constitute an important source of potential technological entrepreneurs, or “technopreneurs”, as well as science and technology ideas and research (Yam 2000). An indicator of the suc-cess of a university is its capability to generate high-technology spin-off compa-nies and to nurture graduates who can create their own jobs, and not merely only fill job vacancies created by foreign investment.

Third, the other key area of tertiary education and universities’ activities, along with research and producing graduates, is that of continuing education and training. Yam (2000) suggests that a university will find it increasingly difficult to sustain its influence unless it continues to play an essential role in lives of its graduates, constituents and communities. A university should reach out to alumni and con-stituents (i.e. the business community, local professionals, government) not simply for fund-raising purposes, but also so that it can serve as part of the continuous development of the intellectual capital of its alumni and constituents. Only through playing their role in the continuing education of their graduates and constituents will make universities stay relevant. This will require the universities to rethink about their relationship with their community of current students, alumni and other constituents. The relationship may have to shift from an intensive period of interac-tion to one of life-long interaction, comprising durations of encounter beyond the undergraduate or postgraduate phases. Universities may have to think of ways to draw each graduating class and constituents back to the universities for continuing education. The reciprocal benefits of continuing education for the universities will be that many of these graduates and constituents will return for refresher courses with more maturity and full of new ideas which can in turn spark off new ideas for professors. While technology can be of assistance in this regard, for example in facilitating distance education, many issues such as funding and the effective form of continuing education have yet to be worked out. There is a wide scope to learn how different countries are rising to the challenges.

In reality, an academe or a university fulfils at least three essential roles in the knowledge-based economy—the pe