Progressive Policy Institute Policy Report, by Kenan Patrick Jarboe
Where the Information Economy Meets Economic Development
Kenan Patrick Jarboe and Richard Cohon
(Ideas in Development: Growing Assets, Expanding Opportunities, Corporation for Enterprise Development, Washington, DC, 1999)
The global information age is upon us – and the practice of economic development must adapt to this new environment. At issue is the changing nature of production, which is no longer merely a process of combining capital, energy, materials and labor. The key inputs today are both formal knowledge/information and informal tacit knowledge that is imbedded in skills and worker experience. This shift changes the skills and community assets required for economic activity. It also changes geographically where production and work take place. Both changes seriously affect the practice of economic development.
The shift to an information economy raises fundamental questions for communities left behind. Will they continue to lose ground, or is this an opportunity to reinvent and reinvigorate themselves? It also raises concerns for lower-skilled production workers and low- to middle- management who are currently “middle-class.” Will those who are just getting by, fall behind, creating a new set of at-risk communities?
For governments and other institutions involved in economic development, old forms and roles are likely to be ineffective or irrelevant in the changed economy. We need to re-develop the basic repertoire of economic development practices, keeping what works and discarding what does not. We must learn how to identify and manage intellectual capital and to understand best practices within the economic development community. This will require an ongoing dialog among those who are trying to understand the global information age, those who are trying to shape it and those who are trying to cope with its effects – in both the public and private sectors.
The new global information economy has emerged with the rise of electronic commerce and greater use of computer and telecommunications technology. In the world of digitized economic activity, information can be delivered instantaneously anywhere in the world. Rather than relying on the knowledge of some small, specialized information elite to direct the organization, many companies are creating a new decentralized social organization of work where success depends on the ability to capture and use the skills and knowledge of the entire workforce. Even in what may be considered lower-level activities, information and knowledge play an increasingly important role as frontline workers assume ever-greater responsibility for their tasks.
Use of information and knowledge is what really counts – not just its production or manipulation. For this reason we believe that the future belongs to the knowledge user as well as to the computer programmer and the knowledge creator. This use of knowledge includes the ability to use both formal knowledge (explicit and codified in books, manuals and databases) and tacit knowledge (experiential, intuitive). Both formal and tacit knowledge are necessary. Either is crippled without the other. It is extremely difficult to use the tacit knowledge of a person who is functionally illiterate. On the other hand, tacit knowledge allows an individual to recognize and use elements of formal knowledge in ways appropriate to a particular situation.The increased importance of both kinds of knowledge is dramatically altering the relationship between production and place, which is at the very core of economic development. While physical capital is easily transferable from one location to another, knowledge and human capital are not. A worker’s skills (including formal and tacit knowledge) are as mobile or immobile as the worker.
Here we stumble upon a paradox for the information age: Individuals and information appear to be more mobile than ever. This leads some to argue that new information technologies will cause services to follow manufacturing toward footloose production. We disagree. Given the importance of both tacit and formal knowledge, face-to-face human interaction remains the most information-intensive means of communication–a critical factor in an information-rich economy. Silicon Valley is just one obvious example of this tendency to cluster information-intensive activities.
Likewise, localized knowledge is needed for customization and for the ability to adapt to rapidly changing situations. For example, a local insurance agent can tap into the company’s knowledge base (formal and informal) to custom design coverage to meet the client’s specialized needs. In this case, tacit localized knowledge is combined with global resources. The result is a production system that is strongly rooted in its local market and knowledge base, and that also draws upon and contributes to the global networks.
So, we may not face a world of completely footloose production where economic activity can be transferred to wherever labor is cheapest or economic development incentives are highest. Instead, the competitive economic success hinges on geographically centered clusters of human capital, skills, knowledge, and local relationships. Importantly for economic development, tacit knowledge is only partially based in the individual; it also resides in the special circumstances and situation of the community.This creates special dangers and opportunities for those communities already left out of the economic mainstream. The danger is that they will not be able to surmount their formal educational deficit and master the skills needed to survive. The opportunities stem from the fact that locally developed information assets are increasingly the keys to economic success. Seizing these opportunities and meeting these challenges requires creativity to discover and develop a community’s information assets, including its hidden pool of tacit knowledge.
The first part of this volume explores asset-based approaches to economic and community development. We suggest expanding that view by taking a lesson from leading companies who are seeking ways to identify and develop their own information assets under the rubric of “intellectual capital.” As Thomas Steward wrote in Intellectual Capital (1997), these companies are developing techniques for locating and then managing their “resources, tacit and explicit perspectives and capabilities, data, information, knowledge and maybe wisdom.” Companies find these assets in the skills and knowledge of their people, in their organizational structures and in their relationships with the outside world, especially their customers.
The corporate experience with identifying and managing intellectual capital is still in the early stages of development. There are no hard and fast techniques, nor are all of the concepts used in a corporate setting applicable to economic development. However, learning from the corporate experience could show the often-fragmented development community how to identify the formal and tacit knowledge both internally in their organizations and externally in the communities that they serve. Then the development community can begin to build a base of common knowledge and understanding about (1) internally what knowledge needs to be shared, what is duplicated, and what may be lacking, and (2) externally what are the local information assets, what assets need to be developed, and who are potential partners.
Armed with this common understanding, development practitioners can begin to develop specific local information assets. This will require re-examining old strategies and re-evaluating the institutions that we rely on to develop and transfer knowledge, as well as those that support the development process. A dialog among all parties – public and private – can begin to determine what works and what is needed. Creating such a dialog is a fitting task for CFED as it embarks upon its next 20 years.
Kenan Patrick Jarboe is President of Jarboe & Associates, a Washington, DC-based political economy consulting firm, and a Senior Fellow at the Progressive Policy Institute.
Richard Cohon is President of the C.N. Burman Company, a manufacturer and
importer of home furnishings located in Paterson, NJ. He is actively involved in
both community economic development and organizational development in the