Etla » Etlatieto

Chaos or Turbulence in Digital Ecosystems: National and Global Responses

admin — Wed, 17 Oct 2012 08:56:59 +0000

Due to the complexity of ICT systems and related technologies, considerable fixed and sunk costs in establishing ICT infrastructures (including systems software), as well as strong complementarities in provision and use of ICT, the competition in the ICT domain increasingly takes place, on the one hand, between ecosystems/platforms and, on the other hand, within an ecosystem/platform that defines a relevant market space. ICT technologies touch upon all aspects of our private and professional lives. Consequently any changes in the core ICT industries have implications elsewhere. Even if ICT has arguably been the single most important productivity driver globally in the past two decades, many established institutional and organizational structures have remained largely intact. Major changes are to be expected in the course of the next decade. The project addresses these issues in 2011 2014. The project is a collaborative three-year research effort between ETLA (Etlatieto) and BRIE, the Berkeley Roundtable on the International Economy at the University of California at Berkeley.

Project leaders: Petri Rouvinen (ETLA) and John Zysman (BRIE).

Finland and Finnish Companies in Global Value Networks

admin — Wed, 17 Oct 2012 08:53:11 +0000

An increasing share of products is developed in global value networks. To the competitiveness of individual national economies it is of pivotal importance where the value inherent in the products is generated. The study approaches the topic from two complementary perspectives that respectively focus on different phases in the industry and technology lifecycles. On the one hand, the study examines large international companies, asking how value is generated in networks across a number of different industries, and how such value is distributed among business functions and geographical regions. On the other hand, the study analyzes the early development phases of emerging technology sectors by shedding light on the role of research networks and multidisciplinarity in the commercialization of science. To bridge the two themes, the study also assesses how start-ups in these emerging sectors are able to integrate into global value networks.

The newest trend in globalization bears witness to an increasingly fine-graded proliferation in the levels of international competition. Companies are still pitted against each other on the industry level, but now international competition has pervaded company boundaries and extended onto the levels of individual business functions (such as production, research, and product development) and work tasks (Grossman & Rossi-Hansberg, 2006, 2008 ja Baldwin 2006).

The gross domestic product (GDP) is the cumulative total of value added produced in a particular country. For the viability and growth of an economy it is therefore of importance in which functions value is generated. Similarly critical is the global location of business functions that generate particularly high value added.

The defining objective of this study is to produce fresh insights on the organizational and geographical loci of value generation in international companies, and to determine how the value produced in their various business functions accrue to Finland. In addition, the study examines new industrial sectors, the value chains and value creation mechanisms of which are still only emerging.

The study comprises of two parts: Part A – Value Creation and the Position of Finnish Companies in Global Networks, and Part B – From Science to International Growth Ventures.

Part A’s central research questions include: which business functions generate value added, how is value generated in the networks of different industrial sectors, how is the generation of value added divided across individual business functions and companies, and in which countries is the value added of different products generated? Part A examines the generation of value added in more than 40 products. Employing statistical data and methodology, the study analyzes the impact of internationalization and global collaboration schemes (outsourcing in particular) on the structure of tasks, productivity, wage levels and profitability in Finland.

The focus of Part B is on the early development phases of new industrial sectors and technologies. The part answers to the following research questions: what is the impact of research networks and multidisciplinarity on the commercialization of science, what are the central challenges and drivers in the commercialization of Finnish research, how do companies in new emerging sectors position themselves in global value chains, and what practices do they employ to integrate into these chains? Part B also develops a tool for assessing the cost-effectiveness of the adoption of new technologies as contrasted to the use of incumbent ones. Providing a cost-based estimate for a technology’s long-term impacts on relative savings and profitability, the tool gives the developer a tangible foundation for price development and negotiations with potential users. Small and medium-sized companies in particular are expected to benefit from the tool in negotiating a value adding position in value networks.

PERSONNEL

Research personnel at ETLA: Jyrki Ali-Yrkkö, Martti Kulvik, Mika Maliranta, Tuomo Nikulainen, Matias Kalm, Petri Rouvinen, Antti Kauhanen, Timo Seppälä, Matthias Deschryvere, Antti-Jussi Tahvanainen, and Pekka Ylä-Anttila.

The project is implemented in close collaboration with Aalto University, University of California (Davis), Stanford University Foresight and Innovation Program and Northwestern University, Kellogg School of Management.

Jyrki Ali-Yrkkö is in charge of the project and the dedicated lead of Part A. Martti Kulvik is the lead of Part B.

New service economy – services as a source of productivity growth

admin — Wed, 17 Oct 2012 08:45:52 +0000

A standard view on economic structure is still based on simplified three sector model: economy consists of primary production, industry, and services. In this model services are a “residual”, while the two others the source of goods and material well-being. The goods-services dichotomy has remained in spite of fundamental changes in economy. In modern economies services and service consumption often determine what kinds of goods are produced and what kinds of technologies used – not the other way round. Services have become an integrated part of goods; the border line between the two is fading away. Digitalization of services has turned out to be an important source of productivity growth in advanced economies.

Traditionally, services have been regarded as non-productive activities, since they could not be stored and therefore they could not be traded in similar way as goods. Today an increasing amount of services are digitalized – they can be stored and exchanged in further transactions. There is currently a major transformation of services going on. The transformation is driven by digital technologies and IT networks as new global infrastructure. Due to digitalization many services are cheap to reproduce, i.e. there are substantial economies of scale in services production. Services are increasingly becoming both tradable and scalable.

This means that services are a hindrance for productivity growth. On the contrary, they have become a major productivity driver in advanced knowledge-based economies. The old notion of “Baumol disease” has lost its significance.

Knowledge-intensive business services are an increasing part of intermediate inputs of all industries. There a growing amount of evidence that competitive and efficient business services sector has a clear positive contribution to the growth of value added and productivity of other industries. And the other way round – high level of regulation of services affects negatively on growth and productivity performance of other industries.

The ongoing services transformation has major implications for global division of labor. The advanced countries – Finland included – are likely to specialize even more than today on service production and trade. The competitive advantage in global digital era is more and more in highly specialized services, as well as in new combinations of industrial goods and services.