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The Global Paradigm Shift and the Transition of Economic Systems to a Network O rder

International Scientific Conference “Networks in the Global World” Saint-Petersburg State University , 22-24 June 20 1 2. The Global Paradigm Shift and the Transition of Economic Systems to a Network O rder. Nataliya Smorodinskaya Institute of economy, Russian Academy of Sciences.

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The Global Paradigm Shift and the Transition of Economic Systems to a Network O rder

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  1. International Scientific Conference “Networks in the Global World” Saint-Petersburg State University, 22-24 June 2012 The Global Paradigm Shift and the Transition of Economic Systemsto a Network Order NataliyaSmorodinskaya Institute of economy, Russian Academy of Sciences Discussion panel1 “Intercompany relationsin Europe, USA and Russia: answering the challenges of the time”

  2. The global shift from industrial to postindustrial paradigm: • new mode of production based on interactive (discontinuous) innovation • World’s transformationinto a multidimensional, continuously ‘running’ space ofnetwork information flows, network entities and network interactions An open multidimensional network space by 2025 (NIC‘s forecast) M. Castells : ‘Timeless time’ & ‘space of flows’ • Amuch more complicated order of the World is shaped by its sharply increased information intensity as a result of ICT-revolution: • global communication environment is getting hyper-volatile, as defined by super high levels of mobility, uncertainty and social interdependencies • global economic space is getting network-based, both technologically(Internet traffic)and physically (networks of production)

  3. The network orderin the world economy emanates as a functional synthesis of hierarchic and market ways of social coordination The new pattern of coordinationmakes transformative cluster networks a new structuralizing element of economic systems , which adapts them to hyper-volatile communication environment and orients them to innovation-led growth (see Smorodinskaya // Innovations, No 4, 2011)

  4. Readjustment mission of the global crisis: to accelerate clusterization of economic systems and modify their traditional organizational code The downfall of hierarchies and the emerging network order are traced at the level of companies, markets, national economies and the whole international community: • Powerful transnationals are transforming themselves through outsourcing into self-governed global network companies(Tapscott & Williams “Wikinomics”, 2007; “Macro-Wikinomics”, 2011) • National governmentsare busy cutting their budgets and passing their functions to self-organized civic networks in accordance with P. Drucker’s idea of “new society of organizations” (D. Cameron’s program “Big Society, Not Big State”, 2009-2013) • Hierarchic banking systemsare facing the risk of collapse, and the most powerful(FRS) and even international (ECB) systems are suffering growing losses • Highly centralized model of the EU is eroded (disintegration of eurozone) and the policy of euro-centrizmis replaced by cluster-led, macroregional approach to integration (BSR, Danube R) • The Westphalia orderis vanishing under desouvereignization and disaggregation of states(Slaughter “The New World Order”. Princeton, 2004)

  5. Clusterization of economic systems is just a part of more general process of emergence ofecosystems of network interactions,which occur at any level (from local to global) and forma social matrix of postindustrial economy The origin of collaboration as seen by sociologists: ecosystem of sustainable interactions between individuals, organizations and their decisions • Such ecosystems are treatedinnovation ecosystemsas they create innovative environment Adapted from: Russell et al. Transforming Innovation Ecosystems through Shared Vision and Network Orchestration, 2011

  6. Collaboration is a superior, interactive form of inter-organizational cooperation emerging in innovation ecosystems (i.e. within network structures and communities) “Collaboration is a process in which autonomous actors interact through formal and informal negotiation, jointly creating rules and structures governing their relationships and ways to act or decide on the issues that brought them together; it is a process involving shared norms and mutually beneficial interactions” (Thomson, A.M. & Perry, J.L.// Public Administration Review, 2006, v.66, s1) • Collaboration between network participants shapes • collective methods of production and governancemeant for innovation-led growth: • Continuous negotiation to elaborate shared visionand achieveself-governancethroughcoordination without hierarchy • Continuous exchange of knowledge, technologies and assets, aimed at co-creation of valuesthrough co-productionandco-specialization of assets Adapted from: A. Eriksson (ed). The Matrix - Post Cluster Innovation Policy. VINNOVA Report, April 2010

  7. A typical macroeconomic pattern of innovation ecosystems is a developed national innovation system (NIS) Developed NIS model (Scandinavian countries) IP - innovation growth policy Underdeveloped NIS model (Russia) IP is a result of collaboration between all institutional sectors and main social groups IP is diffused between several state bodies which lack coordination Adapted from: Serger & Hansson. Innovation in the Nordic-Baltic Sea Region, 2004; Pavese et al. Yaroslavl Roadmap 10-15-20, New York Academy, 2010

  8. A typical microeconomic pattern of innovation ecosystems is a regional cluster network local authorities companies institutions for collaboration other organizations (banks, NGO, etc.) academia / universities human capital all kinds of communications legal framework R & D Infrastructure for clusters’ development Source:Anderson et al. The Cluster Policies Whitebook, 2004 • Involves any institutional sectors to interact as equal partners(Porter, 1998 ) • Joint collaborative self-governancethrough networking and coordinating platforms • Critical value: collaboration between academia, business and authorities, named • Triple Helix Model (concept by Etzkowitz & Leydesdorff, 1998)

  9. Triple Helix is the result of evolution of economy and society: a new way of consensus-building to secure sustainability and self-development of sophisticated network-based systems Adapted from: H. Etzkowitz. The Triple Helix: University-Industry-Government Innovation in Action, 2008 • Overlapping segments:interweavingand interchangeability of functions between representatives of three sectors in the course of collaboration, which provides systems with needed reactivity under hyper-volatile environment

  10. The origin of collaboration as seen by economists (a cluster life cycle) • Collaborationof three sectors • to implement the initiative(Mode 3) -appearance of innovation ecosystem • Сo-location of actorswhichinitiatea common project • (acluster initiative) • Emergence of a cluster core • (initial ecosystem of interactions) Sources: ScanBalt Report, 2006; Etzkowitz, 2008; Solvell, 2009

  11. The innovation-driven growth (which implies a continuously changing variety of technologies and products) emanates from economic effects of collaboration achieved within cluster networks local externalities • Sharp reduction of uncertainty (elimination of information asymmetry) • Sharp reduction of the production and transactional costs • Various complementary combinations of resources to continuously co-create new values • Origination of new cluster networks generating the same effects (fractal frequency) • Central segment: synergetic effect of continuous innovation in tech and products • (“continuous productivitygrowth”, or “competitiveness upgrading “ in terms of M. Porter) Sources: Ketels, 2011; Leydesdorf f, 2011; Porter, 2008

  12. Cluster networks as a new structuralizing element of economic systems: reaching innovation synergy through changes in design Source:author’s design based on institutional and cluster theories(Innovations, No 4, 2011)

  13. Globalized economy is actually a glocalized system. The production is arranged along GVCs which run across sectors and countries and create network nodes in the form of specialized clusters localized within various geographical areas The glocal nature of clusters: a dynamic combination of local and global flows I– global mobility II – mixed mobility III – local business culture Source:Solvell, Lindqvist, Ketels(2003) • New business strategies (to compete for speed in innovation):companies should allocate resources and functions within dynamic clusters all over the world, while selecting for each functional task a concrete cluster where this task would be implemented most efficiently • (adapted from Ketels, 2011)

  14. The ‘secret’ of Silicon Valley isconcealed in its Triple Helix collaboration design In industrial era, TH-collaboration and the success of SV looked unique. But now this design of interactions is becoming universal, typical for a growing number of innovative regions and macro-regions around the world Source: Triple Helix IX International Conference, Stanford, July 2011

  15. Network project technologies for creating a cluster-based macro-regional growth pole: EU Strategy for the Baltic Sea Region (Oct 2009) • BSR:11 territories, 100 networking organizations, 50 strong transnational clusters, first 7 ranks in global Network Readiness Index (Scandinavia) • Action plan: 80 development projects implemented through collaboration (by means of creating relevant transnational networks, each of which is built in TH-way) • Flagman projects(BSR Stars, i.e.) – inter-cluster collaboration Sources: State of the Region Report, 2012; http://www.bsrstars.se/ • Pan-European value added to Silicon valley’s design: combination of a bottom-up approach to clusterization with a top-down, program-led discipline • a test model for other EU transnational macro-regions:how to build a common knowledge space and to make a joint post-industrial break-through by means of collaboration

  16. Russian post-industrial break-through as seen in the global network context • 1.Bad news: • Dominating hierarchic interactions (lack of even double helices) locks-in innovation • Model of resource-based growth and “manual governance” is exhausted • No historical time left for completing previous stages of modernization • 2. Good news: • Global network order opens a chance for a fractal-type over-jumping the stages • Neighboring BSR is the bestdriver • Russian regions have started to generate infant network ecosystems 2 Sustainable growth 1 3 • 3. To get into a resonance with the emerging global network order • Government –to start lifting all administrative barriers for networking • Business –to build up horizontal linksand renew the pattern of inter-firm interactions (an organizational maneuver as a new source of growth) • Academia/ universities – to become a disseminator of new, network economic culture

  17. Conclusions 1. Network coordination is the key organizational and cultural code of post-industrial society and innovation-driven economy of XXI century 2. Cluster networks are a new structuralizing element of economic systems, enabling agents and territories to continuously increase productivity 3Network economy is neither a capitalist nor a market system in traditional sense (relationship contracts, co-production between users and producers, ‘how-strategies’, etc.) 4. Network order is rapidly expanding across the Global World, which requires companies and nations to urgently rebuild their habitual thinking Thank you for your attention! smorodinskaya@inecon.ru

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