Home > Articles > Business & Management > Finance & Investing

The Innovation Economy: How to Create Regional Wealth

Why do some locations succeed in the quest to become centers of technology and innovation while others fail? Learn what forces are currently shaping this "Innovation Economy."
This chapter is from the book

Introduction

Take a look around you. Most of us live our everyday existence in routines that acquire a familiar rhythm. Our homes, transportation, work, and activities with friends and family seem to continue much as they always have. Sure, we might own a hand-held device and find it more useful than a paper pocket calendar. Many of us check in with e-mail and find both the expanded access to people and the quickened speed of communication convenient. These technologies that we as individuals see and experience do not appear to be either radical or life-changing. Yet, the convergence of innovative technologies, being introduced and integrated in certain world regions with a rapidity never seen before, will dramatically change the way we live, work, and relate to one another. It will also provide opportunities for generating regional wealth in new ways that we are just beginning to understand.

Think about the advances in medicine and healthcare, based on the integration of technology with international research and development in the life sciences that may extend the typical human life span over the next several generations to biblical ranges of 100 to 120 years.

Consider product and service development that operates 24 hours a day, 365 days a year, and relies on integrated teams who defy the accepted workday routine and have groups in San Jose, California; Bangalore, India; Herzliya, Israel; and Dublin, Ireland, all working to accelerate innovation to spawn new industries, products, services, and business opportunities.

One of the long-term significant changes at the turn of this millennium is the rapid expansion of a phenomenon called the "New Economy". We prefer to call it the Innovation Economy, because at the core of the new wealth being created is the rapid acceleration of change through innovation. This Innovation Economy is being developed with the combination of financial capital and what the Swedish theorist Leif Edvinsson calls "intellectual capital": the ever-expanding knowledge resource that lies at the core of producing new wealth.

This Innovation Economy is largely driven by the intersection of technological innovation, globalization, and deregulation.

Technological innovation is identified most closely with the Internet, but is not exclusively defined by it. Satellites, telecommunications, biotechnology, advances in microchip technology and applications embedded in products, digital technology, optics, and major breakthroughs in renewable and portable energy are all integrating elements of this rapidly changing environment. In this Innovation Economy, rapid innovations in these categories have begun to create wealth and economic advantage for businesses and regions, which have adapted to the principles of this rapidly changing marketplace. This phenomenon may have revolutionary implications in the shifting of economic advantage and power among regions. Those who "plug in" (that is, invest in the education and skills of their people as the greatest resource for wealth) will thrive. Those regions not developing the intellectual capital of their people, and whose institutions of government, industry, universities, and non-government organizations are dysfunctional, as in much of Latin America, the Arab Middle East, and Africa, will continue to decline.

Sir Peter Hall, author of Cities in Civilization, provides a useful perspective on the transition from an industrial to an informational era.

Peter Hall

There are four elements, all technologically driven. The first is the development of a new infrastructure of communication, commonly called the Internet, and its probable successor, the information superhighway. The second is the increasing interconnectivity of different electronic machines - telephones, computers, faxes, modems - both in terms of numbers of connections, and the bandwidth of connections. The third is perhaps the most fundamental: the fact that almost all information is becoming digital. The fourth is the development on this basis of new applications - the so called killer applications that will constitute the new basic industries of the information age.1

The fast-growing Innovation Economy is not a fantasy. It is largely driven by massive amounts of investments in innovative information technology. The United States has been the primary driver of this investment, enabling U.S. financial markets, governments, and corporations to cut costs and increase flexibility and efficiency. The result is long-term faster growth and lower inflation.

Table 1-1 illustrates the dramatic difference in cumulative annual growth rates (CAGR) between the total and the Internet segment of the U.S. economy.

Table 1-1 The New Internet Economy*

 19951999CAGR Growth
U.S. GDP$6,762 b$7,801 b3.6%
Internet Economy$5 b$507 b213%

This dynamic is even more dramatic in smaller countries such as Ireland, which has seen 9% to 10% growth in GNP from 1995-2000. The Irish have figured out how to adapt to the new economy and are emulated by small regions throughout the world. Smaller nations, such as Ireland, Israel, and Taiwan, tend to have the most global orientation because these countries acquire goods, services, and capital not easily generated domestically.

But just throwing money at technology is not enough. To translate technology into faster productivity growth, financial markets have to be able to fund innovation, provide more flexibility in corporations and labor markets, create a faster pace of deregulation, and increase competition. In addition, the roles of national and local government, industry associations, higher-education institutions, and emergent linking/networking organizations will make a critical difference in the ability of a region to accomplish these needed changes to effectively integrate into the worldwide Innovation Economy.

Knowledge Without Borders

Globalization of the work process happens through technology. This is key to understanding how swiftly the world is changing. New industries and companies are being created based on international operations linked by technology. Alongside this, a new class of knowledge entrepreneurs who are international in background and business perspective is emerging.

One such example is Davidi Gilo, CEO of DSP Communications. Headquartered in Cupertino, California, DSPC's engineers are in Israel and its customer base is in Japan. In October 1999, DSPC was acquired by Intel Corp. to be run as a subsidiary. DSPC signal processing technology originated through the Israeli military and is useful in answering and dictation machines.

Davidi Gilo

The high-tech revolution is significantly different from the industrial revolution. When you talk about the global economy or technology, the model may involve, for example, product definition and innovation from the United States, engineering and development efforts could be done in Europe, and manufacturing could be performed in the Far East perhaps. So in that sense, it's very, very different, because a certain level of knowledge is moving from here to Israel, enabling the engineer to design the product, and then on to Japan, enabling them to make the product.

Now you have multinational companies opening offices in Israel and other places. They move people from location to location, who then return to Israel. And while they're here, they learn a lot of the discipline and the technology that they later on employ back in Israel. We live in a very mobile world today and you can see this phenomenon; it's very good, because that's how knowledge, product development, and marketing ideas get transferred between people and help young companies become more successful.

People in Israel who work on a major project at Intel get the same training as they would in Santa Clara. So basically a company like Intel, Texas Instruments, or IBM that has research centers in Israel operates on a global basis. Every multinational company doing business in different countries and using the same standard that made them successful in those countries helps bring the professionalism from engineering, management, and marketing, which is very significant.

When you have American companies setting up in other countries, then they are tapping human resources, which can be very good. It can be cheaper. The Internet, networking, and optic technology enable you to transfer files in a few minutes. Technological innovation enables all these things to happen. This is huge!

InformIT Promotional Mailings & Special Offers

I would like to receive exclusive offers and hear about products from InformIT and its family of brands. I can unsubscribe at any time.

Overview


Pearson Education, Inc., 221 River Street, Hoboken, New Jersey 07030, (Pearson) presents this site to provide information about products and services that can be purchased through this site.

This privacy notice provides an overview of our commitment to privacy and describes how we collect, protect, use and share personal information collected through this site. Please note that other Pearson websites and online products and services have their own separate privacy policies.

Collection and Use of Information


To conduct business and deliver products and services, Pearson collects and uses personal information in several ways in connection with this site, including:

Questions and Inquiries

For inquiries and questions, we collect the inquiry or question, together with name, contact details (email address, phone number and mailing address) and any other additional information voluntarily submitted to us through a Contact Us form or an email. We use this information to address the inquiry and respond to the question.

Online Store

For orders and purchases placed through our online store on this site, we collect order details, name, institution name and address (if applicable), email address, phone number, shipping and billing addresses, credit/debit card information, shipping options and any instructions. We use this information to complete transactions, fulfill orders, communicate with individuals placing orders or visiting the online store, and for related purposes.

Surveys

Pearson may offer opportunities to provide feedback or participate in surveys, including surveys evaluating Pearson products, services or sites. Participation is voluntary. Pearson collects information requested in the survey questions and uses the information to evaluate, support, maintain and improve products, services or sites, develop new products and services, conduct educational research and for other purposes specified in the survey.

Contests and Drawings

Occasionally, we may sponsor a contest or drawing. Participation is optional. Pearson collects name, contact information and other information specified on the entry form for the contest or drawing to conduct the contest or drawing. Pearson may collect additional personal information from the winners of a contest or drawing in order to award the prize and for tax reporting purposes, as required by law.

Newsletters

If you have elected to receive email newsletters or promotional mailings and special offers but want to unsubscribe, simply email information@informit.com.

Service Announcements

On rare occasions it is necessary to send out a strictly service related announcement. For instance, if our service is temporarily suspended for maintenance we might send users an email. Generally, users may not opt-out of these communications, though they can deactivate their account information. However, these communications are not promotional in nature.

Customer Service

We communicate with users on a regular basis to provide requested services and in regard to issues relating to their account we reply via email or phone in accordance with the users' wishes when a user submits their information through our Contact Us form.

Other Collection and Use of Information


Application and System Logs

Pearson automatically collects log data to help ensure the delivery, availability and security of this site. Log data may include technical information about how a user or visitor connected to this site, such as browser type, type of computer/device, operating system, internet service provider and IP address. We use this information for support purposes and to monitor the health of the site, identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents and appropriately scale computing resources.

Web Analytics

Pearson may use third party web trend analytical services, including Google Analytics, to collect visitor information, such as IP addresses, browser types, referring pages, pages visited and time spent on a particular site. While these analytical services collect and report information on an anonymous basis, they may use cookies to gather web trend information. The information gathered may enable Pearson (but not the third party web trend services) to link information with application and system log data. Pearson uses this information for system administration and to identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents, appropriately scale computing resources and otherwise support and deliver this site and its services.

Cookies and Related Technologies

This site uses cookies and similar technologies to personalize content, measure traffic patterns, control security, track use and access of information on this site, and provide interest-based messages and advertising. Users can manage and block the use of cookies through their browser. Disabling or blocking certain cookies may limit the functionality of this site.

Do Not Track

This site currently does not respond to Do Not Track signals.

Security


Pearson uses appropriate physical, administrative and technical security measures to protect personal information from unauthorized access, use and disclosure.

Children


This site is not directed to children under the age of 13.

Marketing


Pearson may send or direct marketing communications to users, provided that

  • Pearson will not use personal information collected or processed as a K-12 school service provider for the purpose of directed or targeted advertising.
  • Such marketing is consistent with applicable law and Pearson's legal obligations.
  • Pearson will not knowingly direct or send marketing communications to an individual who has expressed a preference not to receive marketing.
  • Where required by applicable law, express or implied consent to marketing exists and has not been withdrawn.

Pearson may provide personal information to a third party service provider on a restricted basis to provide marketing solely on behalf of Pearson or an affiliate or customer for whom Pearson is a service provider. Marketing preferences may be changed at any time.

Correcting/Updating Personal Information


If a user's personally identifiable information changes (such as your postal address or email address), we provide a way to correct or update that user's personal data provided to us. This can be done on the Account page. If a user no longer desires our service and desires to delete his or her account, please contact us at customer-service@informit.com and we will process the deletion of a user's account.

Choice/Opt-out


Users can always make an informed choice as to whether they should proceed with certain services offered by InformIT. If you choose to remove yourself from our mailing list(s) simply visit the following page and uncheck any communication you no longer want to receive: www.informit.com/u.aspx.

Sale of Personal Information


Pearson does not rent or sell personal information in exchange for any payment of money.

While Pearson does not sell personal information, as defined in Nevada law, Nevada residents may email a request for no sale of their personal information to NevadaDesignatedRequest@pearson.com.

Supplemental Privacy Statement for California Residents


California residents should read our Supplemental privacy statement for California residents in conjunction with this Privacy Notice. The Supplemental privacy statement for California residents explains Pearson's commitment to comply with California law and applies to personal information of California residents collected in connection with this site and the Services.

Sharing and Disclosure


Pearson may disclose personal information, as follows:

  • As required by law.
  • With the consent of the individual (or their parent, if the individual is a minor)
  • In response to a subpoena, court order or legal process, to the extent permitted or required by law
  • To protect the security and safety of individuals, data, assets and systems, consistent with applicable law
  • In connection the sale, joint venture or other transfer of some or all of its company or assets, subject to the provisions of this Privacy Notice
  • To investigate or address actual or suspected fraud or other illegal activities
  • To exercise its legal rights, including enforcement of the Terms of Use for this site or another contract
  • To affiliated Pearson companies and other companies and organizations who perform work for Pearson and are obligated to protect the privacy of personal information consistent with this Privacy Notice
  • To a school, organization, company or government agency, where Pearson collects or processes the personal information in a school setting or on behalf of such organization, company or government agency.

Links


This web site contains links to other sites. Please be aware that we are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of each and every web site that collects Personal Information. This privacy statement applies solely to information collected by this web site.

Requests and Contact


Please contact us about this Privacy Notice or if you have any requests or questions relating to the privacy of your personal information.

Changes to this Privacy Notice


We may revise this Privacy Notice through an updated posting. We will identify the effective date of the revision in the posting. Often, updates are made to provide greater clarity or to comply with changes in regulatory requirements. If the updates involve material changes to the collection, protection, use or disclosure of Personal Information, Pearson will provide notice of the change through a conspicuous notice on this site or other appropriate way. Continued use of the site after the effective date of a posted revision evidences acceptance. Please contact us if you have questions or concerns about the Privacy Notice or any objection to any revisions.

Last Update: November 17, 2020