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September 8, 2005
Flat or spiky?
According to Tom Friedman, The World is Flat. Friedman means that advances in telecommunications and globalization have leveled the playing field so that anyone came compete with anyone else - Indian programmers with Silicon Valley computer jocks; Chinese fashion designers with New York's garment district.
Not so, claims Richard Florida. In forthcoming piece in the Atlantic Monthly - complete with fancy graphics - Florida argues that The World is Spiky.
By almost any measure the international economic landscape is not at all flat. On the contrary, our world is amazingly "spiky." In terms of both sheer economic horsepower and cutting-edge innovation, surprisingly few regions truly matter in today's global economy. What's more, the tallest peaks- the cities and regions that drive the world economy - are growing ever higher, while the valleys mostly languish.
This debate is part of the continuing argument over economic geography - why do certain economic activities end up in certain places. In the I-Cubed economy, the answer to that question is not as straightforward as it may seem. It is no longer about location of natural resources and naturally-occurring transport routes (rivers, oceans, valleys, etc.). The deciding variable is the flow of information.
The issue comes down to clusters versus networks: does innovation and production best occur in geographically concentrated clusters or in distributed networks. The answer is the ubiquitous "it depends." Clearly, much of scientific advancement occurs in networks. For generations, scholars have conducted their business through communications with like-minded fellow in other locations. The World Wide Web was invented to facilitate that type of communications. With increased specialization, a scientist at in one university is more likely to have a closer working relationship with someone working half way around the world than with his or her colleagues in their home department.
However, even in scholarly pursuits there has been a desire for proximity (the reason for the foundation of the Royal Society and other scientific organization). More recently, academia has re-discovered the importance of collaboration and cross-fertilization of disciplines - the person in the office next to you maybe working on a completely different research question but may have some important insights that will help your work.
The production process is the same. In some cases, cross-national production networks are the most efficient (such as in computer components and assembly). In other cases, you need to have your suppliers right next door.
The key variable seems to be the type of information and knowledge that is communicated in these activities. If the information is formal and codified, networks maybe the best means of distribution. This holds true for scientific papers and for detailed production specifications. However, if the information it more tacit, then proximity is important. The nuances of the scientific debate or rapid real-time modifications of either the product or process specifications require closer proximity. As I've stated before in Knowledge Management as an Economic Development Strategy, clusters succeed because they are very effective knowledge management mechanisms for transmitting tacit knowledge. As Alfred Marshall said over a hundred years ago:
When an industry has chosen a locality for itself, it is likely to stay there long; so great are the advantages which people following the same skilled trade get from near neighborhood to one another. The mysteries of the trade become no mysteries; but are as it were in the air, and children learn many of them unconsciously.
So, in the end, we will continue to see both networks and clusters. From a public policy point of view, we need to better understand the operations of both of these forms of communications in order to build up the appropriate public infrastructure and create the economic development location strategies best suited to each.
Posted by Ken Jarboe at September 8, 2005 10:00 AM
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