Knowledge Economy: Industry, Education & Innovation

• The traditional industry classification now includes the quaternary industry, defining the knowledge economy.

Four Pillars of the Knowledge Economy

• Education and training is vital for a skilled workforce
• Information infrastructure enables ease of information
• Economic incentives are needed for free flow of knowledge, supported by ICT
• Innovation systems are needed, such as research centers, universities, and access to global knowledge, are crucial.
• Growth and development of the knowledge economy is interlinked with information technology advancements.
• Developed nations benefit most from the knowledge economy due to higher employment in tertiary and quaternary sectors.
• They have more access to all levels of education, as much of the research and development happens in universities.
• Deindustrialization occurs when tertiary activities dominate the economy.
• In the UK, 76% of the workforce is in tertiary and quaternary activities.
• Growth areas include bio-medical, pharmaceutical industries, and media.
• Silicon Valley in California is heavily associated with the knowledge economy, largely due to Jack Kilby's 1958 invention of the silicon chip.

Silicon Valley Case Study

• Kilby's invention, using germanium, revolutionized electronics.
• The area became a global center for high technology, innovation, and social media.
• The San Jose metropolitan area had the third-highest GDP per capita globally, after Zurich and Oslo.
• Silicon Valley accounts for 33% of all US venture capital.
• Headquarters of companies such as Apple, Cisco Systems, and Netflix are located here.
• Companies locate in close proximity to each other for mutual benefit, known as clusters.
• Clusters enable easier innovation diffusion, cooperation, and tech development.
• Dynamic tech seen in Silicon Valley is found in cities with reputable universities.

Cambridge Case Study

• 15,500 people are employed in 430 companies in the Cambridge knowledge sector with £2.9 billion to the economy annually.
• Many work in start-ups founded on Cambridge University research
• Others are employed in the pharmaceutical industry with AstraZenica choosing Cambridge as its global strategic research and development site.
• AstraZenica employs 3,000 people at Granta Park, adjacent to Addenbrooke’s Hospital.
• 130 projects are jointly investigated with the university, compared to 10 a decade ago.
• A further 6,000 jobs could be created in the future.
• Investment from government or other agencies is necessary, accounting for up to 40% of total funding.
• Cambridge’s proximity London is an added advantage with connectivity via its airports also important.
• British Airways offers a direct flight from Cambridge to AztraZenica’s other site in Billund, Denmark.

Barcelona Case Study

• Barcelona is in north-east Spain and the country’s second largest city.
• Referred to as the ‘Catalan Manchester’ because of its involvement in the cotton textile industry.
• 200 ha of the city called Poblenou, is a center of innovation.
• Poblenou was a center of the now defunct textile industry and an area of 4 million sq m of floor space has been designated as the 22@Barcelona district of technological innovation.
• 80% of these buildings have been given new functions linked to high-tech industries and can be found adjacent to new buildings, such as the Torre Agbar.
• Catalan and Spanish governments and the EU has helped Barcelona gain a reputation as a center of excellence for urban regeneration and the application of new technology to secure an industrial future.
• Good surface links by road and rail, an international airport and the healthy Mediterranean climate and lifestyle attract workers to Barcelona.

Cape Town

• Cape Town has a similar climate to Barcelona.
• It is hoping to become the principal location for the knowledge economy in Africa.
• South Africa has six of the top 15 highest-achieving universities in Africa.
• The University of Cape Town and Stellenbosch being the first and third ranked of these.
• Innovation on these two campuses has seen 59% of the country’s start-up companies being found in the Western Cape area in 2015.
• Stellenbosch University’s Innovation District, to the east of Cape Town, has a range of initiatives such as Media Lab, Innovus and the UCT Bertha Centre for Social Innovation and Entrepreneurship.
• Cape Town has a world- famous attractive natural environment.

Quaternary Sector

• This sector includes information services like IT, R&D, education, science, and biotechnology.

Knowledge Economy

• Greater economic value attaches to new ideas, innovation, patents, and data more than physical commodities.

Cluster Economy

• This is a geographic concentration of interconnected businesses, suppliers, and institutions in a certain field.

Knowledge Intensive Business Services (KIBS)

• Localized businesses locate near each other to share knowledge and increase competition. Innovation, initiative, and competence building are crucial in these orgs.
• 50% of KIBS jobs are filled by graduates.

Digital Economy

• It is based on digital computing technologies
• Conducts business through internet-based markets.
• The Digital Economy is worth almost three trillion dollars today.
• 9 companies currently generate 90% of its revenue and profits – Apple , Google , Facebook and Amazon, Microsoft , and the four Chinese digital giants.

Creative Industries

• They originate individual creativity, skill and talent with the ability to create wealth and jobs.
• Prior to the pandemic, the creative industries were one of the fastest growing industry in the UK.
• Prior to the pandemic the creative industry was growing at a rate of 5 x faster than the UK economy as a whole.
• Contributed £111.7billion gross value added to the UK economy.
• Contributed to 12% of the UK exports in 2019.

Biotech and Scientific Development

• The biotechnology industry comprises companies that fuse biology and technology to develop drugs and related products for the treatment of diseases and medical conditions.
• Large pharmaceutical industries include Pfizer, BioNTech, Vertex Pharmaceuticals.
• Recent developments are the Covid-19 vaccinations.
• In total, governments have provided £6.5bn and not-for-profit organizations have provided nearly £1.5bn.
• Companies make money by patenting their products
• Other scientific development companies conduct research or apply research findings to develop new products or processes in a variety of fields.

Patent

• A patent is a form of intellectual property that gives its owner the legal right to exclude others from making, using, or selling an invention for a limited period of years.

Unicorn Companies

• A unicorn is a privately held startup company with a value of over $1 billion.
• There are currently 452 unicorn companies with a combined value of around $1.3 trillion.

Locational Factors

• Influence where an industry is located.

Locational Factor & How knowledge economies are attracted

• Proximity to university allows companies a pool of talent and utilize university research.
• Research institutes helps ease collaboration to create new products.
• Government support in a specific location attracts investment.
• Planning and regulation to provide green and brownfield sites.
• Reduce corporation tax or create enterprise zones to attract investment.
• Increase incentives for graduates to relocate such as subsidizing wages or travel.
• Digital infrastructure such as fast broadband and 5G that supports quaternary industry.
• Buildings/transport that supports an influx of quaternary employees.

Smart Places: UK Examples

• The UK is home to cluster formed of life sciences industries.
• The Cambridge cluster is home to more than 400 life sciences companies.
• The UK Government has supported these industries with the Life Sciences Industrial Strategy.
• Recently £75 million partnership between the University of Bristol and the city council has brought fast broadband to Bristol. A cluster of digital companies in the Temple Quarter is using this digital infrastructure to tackle air pollution and traffic congestion, also trialling self driving cars.

Silicon Valley Mortgage Prices

• The lack of affordable homes in the San Francisco Bay Area has increased significantly in the past decade causing residents to commute longer to their jobs.
• A study found that to live in a 30 minute car journey from their workplace, house prices were $1.5 - $2 million.
• Rent prices have led to a shortage of over 58,000 affordable homes.
• 3 out of 4 low-income renters are ‘rent poor’ paying more than 30% of their income on rent
• 34% of neighbourhoods are experiencing displacement.

Silicon Roundabout: Tech City

• The success of the Silicon Valley led to the growth of the ‘Silicon Roundabout’ and other clusters around the world.
• In November 2010 David Cameron announced “Tech City” programme, aiming to grow a digital cluster in Shoreditch, east London.
• Today there are over 4000 tech firms in the area with 1700 in Clerkenwell, Hagerston and Hoxton alone.
• The government supported its growth through, entrepreneur visa, cheaper finance for SMES, tax breaks for seed funding, venture capital and video games, fast broadband fund.
• Britain is home to eight of Europe’s top 20 universities. The “golden triangle” of Oxbridge and London alone offers six within a 60-mile radius, providing the talent for ‘Tech City’.
• The results are evident with 40% of Europe’s “unicorns” new tech companies worth $1bn or more are British
• Failures of the silicon roundabout include:
  • Failure of integration between UK Universities and the digital economy.
  • The shortage of skilled workers, including coders and developers.
  • The lack of connectivity and ease of connection to fast Broadband services.
  • Number of companies around Old Street roundabout declined drastically from 15,000 in 2014 to only 3,000 in 2017 (Business Insider, 2017).
  • Declining startup activities mainly caused due surging rent which drove out many startups from the area.
  • Hackney council decision to gentrify the area by replacing office building with student apartments (Guardian, 2014).
  • The average house prices in Silicon Roundabout are now between £500,000 and £950,000, with the average house price in the UK being £249,633

Locational Factors of Silicon Valley

• Proximity to universities like Stanford and University of California provide a steady steam of graduates and research
• Research institutes like Nasa Ames Research Centre collaborates with industry and academia
• Planning regulations include restrictive zoning laws that limit high-density development.
• San jose regulations include minimum lot sizes, building setbacks, and height restrictions.
• This increases urban sprawl and high housing costs
• High-speed internet digital infrastructure
• Transportation via US Route 101 and I280 connect it to other parts of california
• Corporate campuses such as sanford research park.
• Hands off laissez faire approach from the government
• Research and Experimentation Tax Credit to companies investing in innovation.