Download - Business Competitiveness Through Technology
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Enhancing RuralEnhancing Rural
BusinessBusinessCompetitivenessCompetitiveness
Through TechnologyThrough TechnologyThomas G. JohnsonThomas G. Johnson
Rural Policy Research InstituteRural Policy Research Institute
University of Missouri ColumbiaUniversity of Missouri ColumbiaMarch 22, 2007March 22, 2007
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Information and CommunicationInformation and Communication
Technology: The IssuesTechnology: The Issues
Digital divide?Digital divide?
Advantage or disadvantage for ruralAdvantage or disadvantage for rural
regions?regions?
Endogenous growth or externalEndogenous growth or external
investment?investment?
Is infrastructure all that is needed?Is infrastructure all that is needed?
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Dimensions of the Digital DivideDimensions of the Digital Divide
1.1. IncomeIncome
Poorer people and poorer placesPoorer people and poorer placescannot afford access to Internetcannot afford access to Internet
2.2. IT literacyIT literacyTechnical skills limit access for some.Technical skills limit access for some.
3.3. GeographyGeography
Peripheral and sparsely populatedPeripheral and sparsely populatedareas are much more expensive toareas are much more expensive toserveserve
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The Vicious Supply/Demand CycleThe Vicious Supply/Demand Cycle
High cost of
Infrastructure
Deployment
Weak demand
for ITC
services
Not attractive
to New
Economy
employers
Low and
declining
population
density
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Digital DivideDigital Divide
Demand aggregation:Demand aggregation: Number of users must be high enough toNumber of users must be high enough to
reduce unit costs to acceptable levels.reduce unit costs to acceptable levels.
When larger firms and governments haveWhen larger firms and governments havededicated access, demand is insufficient.dedicated access, demand is insufficient.
Competition:Competition: In rural areas ICT is frequently provided byIn rural areas ICT is frequently provided by
monopoliesmonopolies
Dynamics:Dynamics: New technologies will always be rolled out inNew technologies will always be rolled out in
urban areas first.urban areas first.
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Information and CommunicationInformation and Communication
Technology: The IssuesTechnology: The Issues
Digital divide?Digital divide?
Advantage or disadvantage for ruralAdvantage or disadvantage for rural
regions?regions?
Endogenous growth or externalEndogenous growth or external
investment?investment?
Is infrastructure all that is needed?Is infrastructure all that is needed?
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Advantages for Rural Regions:Advantages for Rural Regions:
Death of DistanceDeath of Distance ICT reduces costs of distance and sparseICT reduces costs of distance and sparse
populationspopulations Information is ubiquitousInformation is ubiquitous
Services can be produced anywhereServices can be produced anywhere Allows distributed scaleAllows distributed scale
Scale economies can be achieved withoutScale economies can be achieved withoutphysical proximityphysical proximity
Improves quality of life in rural areasImproves quality of life in rural areas Tele-work, entertainment, tele-education, tele-Tele-work, entertainment, tele-education, tele-
medicine, on-line services and shopping.medicine, on-line services and shopping.
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Disadvantages for Rural RegionsDisadvantages for Rural Regions
Cost of ICT is often prohibitive for smallCost of ICT is often prohibitive for smallfirmsfirms
Death of distance also increases externalDeath of distance also increases external
competition for rural firmscompetition for rural firms Rural firms not accustomed to new level ofRural firms not accustomed to new level of
competitioncompetition Fewer skilled service providersFewer skilled service providers
Less sophisticated local governmentLess sophisticated local governmentsupportsupport
Less sophisticated entrepreneurship skillsLess sophisticated entrepreneurship skills
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Information and CommunicationInformation and Communication
Technology: The IssuesTechnology: The Issues
Digital divide?Digital divide?
Advantage or disadvantage for ruralAdvantage or disadvantage for rural
regions?regions?
Endogenous growth or externalEndogenous growth or external
investment?investment?
Is infrastructure all that is needed?Is infrastructure all that is needed?
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Internal or ExternalInternal or External
External firms have advantageExternal firms have advantage
because:because:
More likely to be globally orientated forMore likely to be globally orientated for
sales and procurementsales and procurement
More familiar with their competitorsMore familiar with their competitors
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Information and CommunicationInformation and Communication
Technology: The IssuesTechnology: The Issues
Digital divide?Digital divide?
Advantage or disadvantage for ruralAdvantage or disadvantage for rural
regions?regions?
Endogenous growth or externalEndogenous growth or external
investment?investment?
Is infrastructure all that is needed?Is infrastructure all that is needed?
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Necessary ConditionsNecessary Conditions
Low cost and reliable infrastructure isLow cost and reliable infrastructure isessential but not sufficientessential but not sufficient
Also necessary (Malecki, 2003):Also necessary (Malecki, 2003): Intelligent governmentIntelligent government
A business culture which promotesA business culture which promotesentrepreneurship (Malecki, 2003)entrepreneurship (Malecki, 2003)
An institutional framework which encouragesAn institutional framework which encouragesinter-firm and public-private cooperation,inter-firm and public-private cooperation,
A dynamic tertiary sector providing businessA dynamic tertiary sector providing businessservices and the transfer of technology,services and the transfer of technology,
A minimum level of R&D capabilities,A minimum level of R&D capabilities, Financial instruments conducive to innovation.Financial instruments conducive to innovation.
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Policy OptionsPolicy Options
Adequate infrastructure at aAdequate infrastructure at areasonable costreasonable cost
Public versus private provisionPublic versus private provision Development led by indigenous firmsDevelopment led by indigenous firms
accessing broader markets, oraccessing broader markets, orexternal firms relocating to ruralexternal firms relocating to rural
areasareas External firms may inspire andExternal firms may inspire andaccelerate adoption among indigenousaccelerate adoption among indigenousfirmsfirms
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Policy OptionsPolicy Options
Quality public and private supportQuality public and private supportservicesservices
Local e-government comparable toLocal e-government comparable to
urban areasurban areas Training and encouragement in theTraining and encouragement in the
use of ICTuse of ICT
Entrepreneurship programs toEntrepreneurship programs toexpand the competitiveness ofexpand the competitiveness of
businessesbusinesses
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