guest lecture - j blanco - 9sep2010

LECTURE

KNOWLEDGE BASED ECONOMY AND URBAN FABRIC TRANSFORMATIONKNOWLEDGE-BASED ECONOMY AND URBAN FABRIC TRANSFORMATIONCrossroads between innovation and urban policies in US, Finland, Singapore and Chile

GUEST LECTURER:J BlJuan Blanco

LECTURER:Jennifer Day

‘The Economies of Cities and regions’The University of Melbourne

Melbourne, Victoria9 September, 2010

Silicon Valley Historic Development

In Silicon Valley appears a new territorial location system, based in the proximity of local actors.

Those actors are highly‐dependant on face‐to‐face contacts to continue their processThose actors are highly dependant on face to face contacts to continue their process of knowledge that characterize high technology industries

By the year 2008, it contained the most highly‐concentrated area of innovative firms ld d ( h h h h l f l d h dworldwide (More than 20.00 high‐technology firms are located in the area and

several services and supports firms are ‘clusterized’ in the area).

Multimedia Super Corridor MALASYA

Otaniemi Science Park FINLANDKansai Science City, JAPAN

Singapore Science Park, SINGAPOREMultimedia Super Corridor, MALASYA

Guadalajara, MEXICODublin, IRLAND

Stanford Research Park, EEUU

Sofía Antípolis FRANCE

Otaniemi Science Park, FINLAND

Campiñas, BRASIL

Route 128 Massachustes, EEUU Illinois Technology and Reseach Corridor, EEUU

Bangalore, INDIA Sofía Antípolis, FRANCE

C b id T h l k UK

Dresden, GERMANYShanghai, CHINA

Dalian Software Park, CHINA

Taguspark, PORTUGAL

Cambridge Technology park, UKResearch Triangle North Carolina, EEUU

Telecom Corridor Dallas, EEUUTel Aviv, ISRAEL

Chennai INDIA

Zhon Guan Cun, CHINA

Casablanca Techno Park MORROCOChennai, INDIA Casablanca Techno Park, MORROCOMelbourne, AUSTRALIA

Globalization and Urban Transformation

Nowadays, the most competitive metropolitan areas has been converted into complex services platforms (De Mattos, et al. 2005)

In that context competitive cities has developed specific structures for those processesIn that context, competitive cities has developed specific structures for those processes that are setting new challenges for its urban development:

Its leadership is highly‐dependant of the innovation capacity within its territory

This has accelerated the introduction of new building typologies that are affecting the configuration of the pre existent urban fabric.

One of the most important outcomes of this process is the emergence of highly‐concentrated productive processes in specific areas of the cities. In that context:

a) What is the role of the urban fabric in fostering and improving such concentrations?

b) What are the critical characteristics that allows the innovation process?

c) At what point is it possible to improve its strengthens? From which urban policies?

Researcher in R&D Students

Number of computers in 1998 per 1000 inhabitants Number of cellular phones in 1998 per 1000 inhabitants

Knowledge‐based Economy and Localization theories

The localization of productive activities has been treated from different approaches ‐sociological, geographical or economical, due to the understanding that a process of profound transformation has been carrying out in recent years, affecting the organization of production activities where old hierarchical models has beenorganization of production activities, where old hierarchical models has been replaced for flexible and decentralized structures of organization (Vázquez‐Barquero, 2006).

This shift has been strongly accelerated in the 21st century, and could be described by two stages:

A first stage where the knowledge is discovery as a determinant factor for the A first stage where the knowledge is discovery as a determinant factor for the development of the enterprises; and

The current stage, initiated in the end of 1990s, where the role of knowledge is directly related with the innovation capacity of the enterprise, putting strong emphasis in the processes that allows its diffusion in an specific environment (Dunning, 2001).

Knowledge Economy and Territory

Definition: The concept of Knowledge Economy seeks to describe the major dependency on knowledge, information and skills from the public and private sectors. (OECD, 2005)

This definition derives from the role of knowledge in the majority of the contemporary economic theories, where stands‐out:

Growth Poles Theory (Perroux): that bring forward the attraction capacity of those enterprises with the ability of spread innovative practices and knowledge

Innovation Clusters Theory (Porter): reinforce the role of interaction between firms Innovation Clusters Theory (Porter): reinforce the role of interaction between firms within a cluster to overcome technological needs (which give them an competitive advantage)

2002

PROXIMITY DYNAMICS

Rallet / Torre / Gilly / Pecquer / Bellet / Grosetti

KNOWDLEDGE ECONOMY AND

LEARNING REGIONSMansell / Machlup /

NATIONAL AND REGIONAL

INNOVATION SYSTEMS

1995

Pecquer / Bellet / Grosetti pFlorida / Antonelli / Ferrao

SYSTEMSLundvall / Cooke / Silva

COMPETITIVIE ADVANTAGE OF NATIONS AND

REGIONS

INNOVATION +

TERRITORIAL

INNOVATIVE MILIEU AND INNOVATION

NETWORKS

1985

REGIONSPorter / Dunning / Alburquerque

TERRITORIAL DEVELOPMENT

Aydalot / Mailiat / Camagni / Storper /

Crevoisier

1985

INDUSTRIAL DISTRICTS AND

LOCAL PRODUCTIVE

ECONOMIC THEORY OF INNOVATION AND INNOVATION CYCLES

LOCAL AND REGIONAL

DEVELOPMENTh / / f

1975

SYSTEMSBecattini / Bellandi /

Garafoli / Pyke / Sforzi / Ybarra

INNOVATION CYCLESFreeman / Soete / Dosi / Pavitt / Rosenberg / Perez

Sthor / Quevit / Max‐Neef / Friedman / Boisier / Vazquez‐Barquero

1975

National Diamond (Michael Porter)

Integrate previous works in competitive five forces theory (determine the competitive intensity and therefore attractiveness of a market), value chain framework (chain of activities for a firm operating in a specific industry) as well as his theory of competitive advantage (position of a company in a landscape that allows highercompetitive advantage (position of a company in a landscape that allows higher return earnings).

Analysis of patterns of comparative advantage among industrialized nations.

Looks at the sources of competitive advantage derived from the national context.

It can be used both to analyze a firms ability to function in a national market, as It can be used both to analyze a firms ability to function in a national market, as well as analyze a national markets ability to compete in an international market.

It recognizes four pillars of research (factor conditions, demand conditions, l d d i i d i fi d i l )related and supporting industries, firm structure, strategy and rivalry)

SOURCE: Michael E. Porter (1990), The Competitive Advantage of Nations, New York: Free Press

FACTOR CONDITIONS

DEMANDS CONDITIONS RELATED AND SUPPORTING S SDEMANDS CONDITIONS INDUSTRIES

STRATEGY STRUCTURESTRATEGY, STRUCTURE AND RIVARLY

The Innovative Milieu*

… the set, or the complex network of mainly informal social relationships on a limited geographical area, often determining a specific external ‘image’ and a specific internal ‘representation’ and sense of belonging, which enhance the local innovative capability through synergetic and collective learning processescapability through synergetic and collective learning processes(Camagni 1991, 3).

According to this theory, three main sets of elements mark creative/ innovative lmilieus:

Effective actor relationships within a regional framework;

Social contacts that enhance learning processes,

And image and sense of belonging.

External effects, favorable to creation, to location and to firms rooting ‐leading in fact to regional growth‐ are due to the existence of a dynamic and located productive system, of an innovative milieu.system, of an innovative milieu.

* The notion of the innovative is mainly associated with the Groupe de Recherche Europeen sur les Milieux Innovateurs (GREM I).Innovateurs (GREM I).

SOURCE: Camagni, R., 1991, 'Introduction: from the local ‘milieu’ to innovation through cooperationnetworks', in: Camagni, R. (ed.), Innovation Networks: Spatial Perspectives. Belhaven Press,London, 1‐9.

Effective actor relationships within a regional framework

Social contacts that enhance learning processes

METROPOLITAN AREA

g p

Image and sense of belonging.

INNOVATIVE MILIEU

I+D StructureTechnology ParksHigher Learning Institutions

Private StructureHigh‐Technology Firms

Risk Capital FirmsIndustry Associations

Business Parks

Institutions

Government StructurePublic Research Centers

Government Administrative BodiesPublic Financing Bodies

Knowledge and Territory

Nowadays, the prominent role of exchange and learning processes in addition to thetheoretical contributions of diverse disciplines has pointed to the relation betweeninnovation and territory as the key factor to understand the success or failure ofcountries and regions in the knowledge economy paradigmcountries and regions in the knowledge economy paradigm.

This relationship has been defined by the role granted to geographical andinstitutional proximity, as a facilitator factor for exchange and diffusion of knowledge:

Allows the reduction of transaction and negotiation costs

Favored the improvement of profitability of its enterprises Favored the improvement of profitability of its enterprises(Vázquez‐Barquero, 2006).

Despite of that, most of those approaches have developed a strongly deterministicview, since the success of a specific territory can not be exclusively associated to itslearning and knowledge capacity (Hudson, 1999).

Spatial characteristics of Innovation

The geographical and institutional proximity allows to improve the critical knowledge and information transference to continuous innovation of its productive structures. This characteristics are translated in diverse spatial configurations:

a) Knowledge generation poles: higher education institutions, public and private research centers, science cities, etc.

b) Production hub of knowledge application: high‐technology firms, new industrial districts, etc.

c) Technological and firm concentration areas for knowledge spreading: technologyc) Technological and firm concentration areas for knowledge spreading: technology parks, new business centers, productive corridors, etc.

CLUSTERS: The Silicon Valley in the San Francisco Bay

An spontaneous concentration of activities due to urban development regulations,land availability and local factors.

It presents a high technological content following with an use of research andIt presents a high technological content, following with an use of research andinnovation centers located in the area

It emerged from the incentive of professor from Stanford University towards itsstudents to form its own enterprises in the surroundings of the university, with theaim to respond military research demand

Nowadays it operates through the recognizable centrality of the Stanford UniversityNowadays, it operates through the recognizable centrality of the Stanford University, in Palo Alto, connected with San Francisco and San Jose through the 1001 Highway, airports and urban centers.

Gather more than 9.000 electronic companies and more than 5000 scientist, creating an excellent innovation capacity that involves the whole region.

SAN FRANCISCO BAY

METROPOLITAN AREA OF SAN FRANCISCO BAY, CALIFORNIA, US

HIGH TECH FIRMS

LEISURE FACILITIES

HIGHER EDUCATION INSTITUTIONSHIGHER EDUCATION INSTITUTIONS

INNOVATION SERVICES

UNIVERSITIES

CLUSTERS: TI Cluster in Helsinki, Finland

Clusters systems established above a regional structure designed in a national level,that includes university cities and fast‐growing areas

In its beginnings it was almost entirely focused in communication technologies due toIn its beginnings it was almost entirely focused in communication technologies due tothe complicated geography of the Finland territory. In later years, it has coveredseveral related technologies (micro electronics, mostly)

The parks networks of Helsinki covers a greater part of its urban area, mostly closedto university, research and transport centers.

It represents a mix model within a metropolitan location but planned from the localIt represents a mix model, within a metropolitan location but planned from the localgovernment.

Based its strengthen in the promotion of leading national firms (NOKIA), supportedby a network of subsidiary firms and specific research centers.

It is financed with investment from big firms, the government and risk capital. Mostof the R&D activities are covered by the universitiesof the R&D activities are covered by the universities.

METROPOLITAN AREA OF HELSINKI, FINLAND

HIGH TECH FIRMS

LEISURE FACILITIES


INNOVATION SERVICES

UNIVERSITIES

CLUSTER: Singapore, the TI Island

Public‐Private Model, planned, implemented and managed by the government, supplying to the country with the necessary R&D infrastructure to attract high‐technology firms

The innovation capacity is low, and most of them comes from foreign firms and big government institutions.

It has been developed from the ‘Technological Corridor’ initiative, with an extension of 15 kms. in the southern part of the island, planned to be implemented in three stages.

The model it is supported with the lease of spaces within the Technology Parks, public investment and return from R&D activities.

PORT METROPOLITAN AREA OF SINGAPORE, SINGAPORESINGAPORE

HIGH TECH FIRMS

LEISURE FACILITIES


INNOVATION SERVICES

UNIVERSITIES

The Role of Urban Planning

The learning capacity of a territory is a strong factor in the competitiveness of citiesand regions, but the role of the urban development, the change and adaptability ofits institutions are also been considered key factors too(Vázquez‐Barquero 2006)(Vázquez Barquero, 2006).

In that sense, the actors related with the production of knowledge, where outstandHigher Education Institutions, had had a strong prominence since the emergence ofnew policies and private initiatives based in strengthen those entities to encourage aknowledge‐based development.

Table 2 – Expenditure on R&D and Patents (selected countries)

Patents granted by

USPTO

Patents granted by

USPTO per

million people

Total R&D

expenditure as %

of GDP

Business R&D

expenditure as %

of total

Effectiveness of

R&D expenditure

(cost of each

expenditure patent in US$

millions)

CHILE 15 1.0 0.5 35 36.4

G-7 23.152 153 2.2 - -

AUSTRALIA 1.047 53 1.5 48 5.8

N.Z. 165 41 1.0 37 5.0

CANADA 3.893 123 1.9 55 4.1

FINLAND 944 181 3.4 70 6.0

MALAYSIA 63 3 0.5 - 10.6

Source: Machinea and Vera (2006)

The Chilean Case: Santiago as innovative Milieu

Santiago, the capital city of Chile, has undergone numerous changes in its urban fabric due to the process of liberalization and globalization of its economy since mid 1980s.

The urban structure shows the consequences of this accelerated process of development, affecting its social, physical and economical configurations, involving the form and internal configuration of the city.

These processes, has been denominated by numerous authors (Castells, 2005, De Mattos, 1999) as the 'globalization stage of Santiago'.

Even though the city has increased it competitive indexes[1], some authors are concern with the real effects of this process, arguing that there is no real adoption of 'new leading activities' in its structure of production and that the city continues to be a point of departure of commodities with few aggregate value (de Mattos, 2004; Fuentes y Sierralta, 2004).

[1] Santiago has been named 'Gamma City' by the Gawc in 2001; Ranked 3rd in living quality in Latin America by MHRC (2003 y 2004); and ranked 1st best city for doing business (America Economia, 2004).

The Issue: A stagnation in the competitiveness performance of the country (Chile) and its capital city (Santiago): The Good

YEAR UNIT RANKING SOURCE

19902005

CHILE 6,000‐12,000 USD

* In 15 year has double the income per capita

CNIC(National Council ofInnovation for Competitiveness Chile)Competitiveness, Chile)

20012004

SANTIAGO GAMMA City

* Level of globalization

GaWC(Globalization and World Cities Research Network) Level of globalization )

20032004

SANTIAGO 3rd

Quality of living in Latin AmericaMHRC(Mercer Human Resources)

2004 SANTIAGO 1st

City for doing businessAmerica Economia(Magazine)

2005 CHILE 27th WEF 2006 Global Competitiveness Ranking (World Economic Forum)

The Issue: A stagnation in the competitiveness performance of the country (Chile) and its capital city (Santiago): The Bad* Source: Banco Central de Chile

GDP GROWTH RATE, CHILE

7.00

8.00

4.00

5.00

6.00

TAG

E

2.00

3.00

PERC

ENT

-1.00

0.00

1.00

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

YEAR

The Issue: A stagnation in the competitiveness performance of the country (Chile) and its capital city (Santiago): The Ugly

YEAR UNIT RANKING SOURCE

2004 CHILE 0 68% CNIC2004 CHILE 0,68%

Percentage of the GDP for R+D

CNIC(National Council ofInnovation for Competitiveness, Chile)

2007 SANTIAGO 1st

* Lowest levels of intellectual productivity and innovation in Latin America

America Economia(Magazine)

2007 CHILE Public research system scarcely linked with the market

OECD

2008 CHILE 53rd WEF2008 CHILE 53

State of Cluster’s development

WEF (World Economic Forum)

2008 CHILE 51st WEF2008 CHILE 51

Quality of scientific and research institutions

WEF (World Economic Forum)

Moving towards a Knowledge‐Based Economy

In the Chilean case, the promotion of knowledge‐based activities is based in the 'cluster' approach, and can be seen in the preliminary objectives of the National Council of Innovation for Competitiveness (Eyzaguirre 2007)(Eyzaguirre, 2007).

Based in the understanding that clustering –particularly clustering of biotechnologyand ICT activities, is not related to physical comparative advantages, as one might find with natural resource clusters, e.g. salmon aquaculture or mining, the case of high technology enterprise concentrations in Santiago could prove the emergence of a innovative milieu (Castells y Hall, 1994), where its competitive advantage came from unexpected urban interactions between private agents minimum regulations andunexpected urban interactions between private agents, minimum regulations and localization advantages.

“We understand the innovative milieu al the system of social, institutional, organizative, economical and territorial structures that create the conditions for a continuum generation of synergies and its investment in a process of production that emerge from that synergic capability, as well as its units of production that are part of this milieu as for the milieu as a whole”this milieu as for the milieu as a whole

(Castells y Hall, 1994: 363)

In search for a Chilean‐Model: recent initiatives

In recent years, numerous initiatives intended to capitalize high‐technology concentrations helped by the framework given in the National Innovation System initiative.

The typology of those projects has been:

Research and Development Centers (R&D) Research Universities Public Research Centers Venture Capital firms Innovative Firms Innovative Firms Business Incubators

The ones related with the high technology sector are mainly clustered in Santiago, and has been based in the 'Technology Park' typology, located in suburbs, disconnected from the traditional networks of research and knowledge that the city had developed.

Table 1 – Territorial projects related with research, business and innovation Year Name Location

1991 Observatorio VLT Cerro Paranal

1995 Parque Científico y Tecnológico UCH* Pudahuel RM1995 Parque Científico y Tecnológico UCH Pudahuel, RM

1997 Ciudad Empresarial* Huechuraba, RM

1998 Parque de Negocios ENEA* Pudahuel, RM

2000 Ciudad de CURAUMA* Placilla, V

2006 Parque Tecnológico Ciencias para la Vida* Ñuñoa, RM

2007 Centro Científico Valdivia, IX

2008 - ongoing Parque Tecnológico U de Concepcion* Concepcion, VIII

Edificio del Software GECHS Santiago, RM

*Consider the Research Park typology in its master plan design

Source: Blanco (2008)

High Technology meets Natural Resources

The National Council of Innovation for the Competitiveness focused its policies in adding value to the traditional natural resources sectors that have built the Chilean economy, through new methods and knowledge.

A special emphasis was given to those economic activities recognized as 'cross‐cutting' to development of the innovative capacity ‐the Information and Communications Technologies (ICT) and Biotechnology (BIOTEC).

The main issue in implementing this strategy lays in the disconnection between those two activities:

Natural resources activities were clustered mainly in the northern (e.g. copper in Antofagasta) and southern (e.g. salmon and forest Puerto Montt) cities

High technology activities were clustered in the Metropolitan Area of Santiago (MAS), due to its concentration of Higher Education Institutions (HEIs), economical power, administrative government and urban services of high standardstandard

(Rosas et. al, 2006)

Clusters based in natural resources promoted in the Chilean territory

Astronomy

Mining

Biotechnology

Winery

F tForest

Salmon

Eco Tourism

1. Northern System 2. Central System 3. Metropolitan System 4. Southern System 5. Austral System

Source: Ugarte et al (2007)

MiningAstronomyEco Tourism

WineWoodAstronomyFruitAgroindustry

BiotechnologyAstronomyHigher EducationNative Forest

SalmonEco TourismSeaNative Forest

Eco TourismEnergyWater

Metropolitan Central region


Urban and regional structure of the Metropolitan Central region


Regional Clusters

Winery Valley

Transport Hub

Agriculture

Fruit

Culture Port

TI industry

Biotech industryy

Higher Education agglomeration


Technology Corridor Santiago‐Valparaiso


Innovation Capacity in the Chilean Territory

Several studies detects that “the capacity of innovation of its territories is weak” (Rosas, et al. 2006). This phenomenon, according to Brunner y Elacqua (2003) it is a consequence of:

i. A precarious common infrastructure of innovation

ii. A weak development of innovation clusters

iii. A scarce linkage between clusters and common infrastructure of innovation

In the last years it has appear a strong drive to improve the innovation capacity of theIn the last years, it has appear a strong drive to improve the innovation capacity of the country, through:

a) The incensement and strengthen of infrastructure for research

b) The development of its most competitive industries through cluster models

(Rosas et al 2006)(Rosas, et al. 2006)

Knowledge structure of the Metropolitan Area of Santiago (MAS)


Enterprise structure of the Metropolitan Area of Santiago (MAS)


Mechanism for innovation structure of the Metropolitan Area of Santiago (MAS)

LEYEND


Tech. & Business Parks Business Incubators Intellectual and Patents Institutions

Inno. & Tech. Transfer Centers Technological Consortiums Technology Nodes

Time access to the New Business Center

A 5b

5 5‐10 10‐20 20‐30 30‐60 60‐+

BIOTECH and IT in Santiago: Patterns of Development

The biotechnology activities in the area around Marathon Avenue emerged during the 1990s as a nascent sector associated with the non‐traditional natural resource exporting industries and its proximity to Campus San Joaquin of the Universidad Catolica de Chile following the pattern of other biotechnologyUniversidad Catolica de Chile, following the pattern of other biotechnology concentrations in the world (see Farias, 2005).

The concentration of firms in the IT sector was apparent in the historical centre of Santiago by the end of 1970s. Those early firms help the process of modernization of the old public enterprises and its conversion into private‐owned firms. During the 1990s the new IT firms migrate next to the new Business District in El Golf neighborhood were the headquarters of global enterprises werein El Golf neighborhood, were the headquarters of global enterprises were attracted in respond of the new policy of open economy of the country.

Due to the relatively recent development of these two sectors in the Chilean case, and their specifically knowledge‐based components, there are relatively little facilities to support its development.

In many ways the current national innovation policy seeks to transform this trend inIn many ways, the current national innovation policy seeks to transform this trend in order to create the synergies necessaries to stimulate development in key strategic technology areas.

Urban StructureTI INDUSTRY

Urban StructureBIOTECH INDUSTRY

Urban StructureHUMAN, INSTITUTIONAL AND FINANCIAL RESOURCES

Urban StructureKNOWLEDGE GENERATIONKNOWLEDGE GENERATION

Urban StructureMECHANISM FOR INNOVATION

Urban StructureUrban StructureMETROPOLITAN AXIS

Leyend

METROPOLITAN AXIS

KNOWDLDGE GENERATION

TI INDUSTRY

BIOTECH INDUSTRY

MECHANISM FOR INNOVATION

HUMAN, INSTITUTIONAL AND FINACIAL RESOURCES

guest lecture - j blanco - 9sep2010

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