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The emphasis in this book is on the ‘learning economy’ rather than the ‘knowledge‐based economy’ (as for example stressed by OECD), since the key to modern success is not so much as to have access to a stock of specialized knowledge, as to be able to learn rapidly and then forget when older ways of doing things get in the way of newer ways. It is argued that in Europe, the learning economy calls for new institutional set ups and new policies at the level of both the nation state and the European Union. The focus of the book is on how innovation policy needs to be designed in the new context. Some of the crucial aspects of the globalizing learning economy are illustrated by a simple model in which transformation pressure is linked to the ability to innovate and change, and to the cost and benefits of the change and their social and spatial distribution (which have become more uneven in the last decade). Since innovation is strongly related to competence building at the firm level, a second model is presented to illustrate the three sources that firms may draw on when building and renewing their competence (hiring and firing, internal competence building, networking and alliances); the building of a learning organization within the firm and its integration with strategies of internal competence building is then discussed, as is the role of trade unions.

In the introductory chapter, it was argued that an even broader set of policies needs to be integrated in a strategy to cope with the challenges of the learning economy. In this concluding chapter, the focus is on policies aiming directly at enhancing the capability to adapt and innovate. The first section discusses a new theoretical rationale for innovation policy by analysing different sources of competence building at the firm level. In doing so, it locates five areas where there is a special need to intervene in order to enhance the learning capability of the economy (human resource development, creating new forms of organization, building innovative networks, reorienting innovation policy towards service sectors, and integrating universities in the innovation process); these are discussed in the second section. The last two sections of the chapter address innovation policy in a wider perspective, and a European agenda for innovative policy.

Suggests two important ideas: first, it is proposed that the institutional integrity of the university needs to be preserved, since universities are a special type of learning organization specialized in producing and diffusing knowledge in unique ways; second, it is argued that, important as universities are, they are not enough to guarantee prosperity, and there is a need to promote a diversity of organizational arrangements, even at the higher education level, which could then be a major contributor to ensuring the institutional integrity of the university. The analysis is based on the way organizations deal with knowledge, i.e. the way they promote ‘learning’, where learning is understood as the mechanisms through which knowledge is produced and diffused. Hence, the chapter starts by describing a conceptual framework where the understanding of learning as a process of knowledge accumulation is made explicit. Next, the application of this model to the context of the university is discussed. The concluding section summarizes the main arguments of the chapter.

An analysis is made of the impact that the emerging learning economy may have on the processes of social exclusion with the focus on the sphere of work, since employment is seen as the core of the social tie that links individuals within society. The first section of the chapter discusses globalization and the learning economy. Next, the changing patterns of (un)employment (flexible employment, as exemplified by part‐time work, temporary work, home‐working, and self employment) and career structure are addressed that are caused by global competition, moves towards a learning economy, individualization of work in the labour process, and restructuring. The next two sections address first, regional exclusion, and second, social exclusion arising directly from the learning economy as the result of the formation of a new underclass of workers whose knowledge can be codified and automated, so that they become unnecessary. The last three sections address the policy implications of social security, and individual‐targeted and general strategies for combating social exclusion.

In this chapter, the account of the emergence of the new learning economy is based on research carried out within the framework of the European Commission's Targeted Socio–Economic Research (TSER) project ‘Technology and Employment’. In the first section, some aggregate economic evidence is briefly reviewed that shows a remarkable divergence in growth pattern between the USA, and Europe and Japan over the last decade. In the second section, some of the main new features of the economy as identified by Business Week (globalization and digitization) are reviewed. The third section discusses the challenges posed to traditional economic concepts, and in particular, to the functioning of markets by a more open, immaterial economy in which value generation is less related to material production than to information content, distribution, and consumer interaction. Lastly, some policy conclusions are drawn.

Considers the policy implications of the perspectives on socio–economic development in Europe opened up by work done on the globalized learning economy. It raises questions, first, about what sort of policies are needed, second, about the current focus of innovation policies in Europe, and, finally, about the changes in policy needed to face up to the challenges of the next two decades. It draws upon the research summarized in Bengt‐Åke Lundvall's and Susannah Borrás's volume The Globalising Learning Economy (1998) and also on research on industrial policy currently underway in the European Commission's Targeted Socio–Economic Research (TSER) project, ‘Science, Technology and Broad Industrial Policy’ (SOEl‐CT97‐1053), and on the author's own work on the EU's research and technological development (RTD) policies summarized in the book published in 1998 with John Peterson (Peterson and Sharp, 1998).

In the current era, where global competition increases the need to constantly develop and renew skills and competences, governments play an important role, both in terms of direct social investment in the upgrading of skills and in designing institutions so that they underpin individual and organisational learning. This chapter shows that there are dramatic differences among European member states in terms of organizational learning. In southern European nations, jobs are relatively simple or Taylorist, while jobs in the Nordic countries are characterised by more access to learning and to discretion in pursuing tasks. Such differences seem to reflect labour markets with flexicurity and open education systems. The chapter argues that to realise the aim of the Lisbon strategy, ‘to make Europe the most competitive region in the world with social cohesion’, the strategy should have given more attention to upgrading the institutions of labour markets and education systems with the aim of speeding up and facilitating the industrial transformation of countries such as Greece, Portugal and Spain.

This chapter argues that the phenomenon of international equality and the related problem of inequality within countries may best be understood in the light of a systematic theory of technical change and long cycles in economic growth. The first section briefly introduces the theme of widening gaps between rich and poor countries, and the next discusses the analogous problem of widening gaps in the distribution of income within countries. The third section links these problems of inequality to long‐term changes in technology and to the problems of ‘catch‐up’ by countries that have fallen behind. The fourth section relates this discussion to contemporary problems of catch‐up in information and communication technology (ICT). The final section presents conclusions and points to some important differences between the international and national dimensions of inequality.

This chapter sets out the book's main theories and arguments. This book attempts to study the economics of “learning societies,” focusing especially on the role of government in promoting growth through the creation or strengthening of a learning society. It lays out simple models in which learning spillovers are well identified. The models generate policy prescriptions which differ markedly from standard policy recommendations that focus on enhancing allocative efficiency. The book further argues that there is an infant economy argument for protection. Growth and standards of living can be raised by defying a country's seeming comparative advantage and imposing trade restrictions that encourage industrialization. But the book also provides a different perspective on what is meant by comparative advantage.

This chapter looks at four broad issues regarding how government macroeconomic and investment policies can help create a learning economy. The first looks at financial and capital market liberalization. It uses an information-theoretic analysis to help explain why such liberalization may systemically be associated with more macro-instability. The second considers exchange rate policy. Adjustments in exchange rate have become an increasingly important tool with the advent of increasing international restrictions on the use of trade and industrial policy. The third deals with foreign direct investment (FDI), asking how and when it can be used to promote a learning economy. The fourth examines the role of government investment.

This chapter shows that the relationship between competition, innovation, and welfare in quite standard models of market interaction is far different than has been widely presumed. The first three sections explain whether and the circumstances under which the level of innovation with monopoly is greater than that in more competitive environments, even apart from imperfections in risk and capital markets. The final section examines the flaws in Joseph Schumpeter's theory of market structure, i.e. that at any one moment of time the market would be dominated by a single firm but that there would be a succession of monopolists. It shows why the monopoly power that Schumpeter seems to extol may be more persistent than he thought and why Schumpeterian competition may not suffice to lead to a dynamic, learning economy, or at least leads to an economy which is not as dynamic as it could or should be.

It has now become commonplace to refer to the current period of capitalist development as the era of the ‘knowledge-based’ (OECD 1996) or ‘learning’ (Lundvall and Johnson 1994) economy. No matter which label one prefers, the production, acquisition, absorption, reproduction, and dissemination of knowledge is seen by many as the fundamental characteristic of contemporary competitive dynamics. Long before this parlance became popular, scholars had expressed a deep interest in distinguishing between different types of knowledge. Philosophers of knowledge such as Ryle (1949) and Michael Polanyi (1958; 1966) anticipated later developments in social constructivist thought by enunciating what was for them a crucial distinction between knowledge that could be effectively expressed using symbolic forms of representation—explicit or codified—and other forms of knowledge that defied such representation—tacit knowledge (see Reber 1995; Barbiero n.d.). Within the field of innovation studies and technological change, and especially since the publication of Nonaka and Takeuchi’s The Knowledge- Creating Company (1995), the distinction between tacit and codified knowledge has been accorded great significance. However, in characteristically prescient fashion Nelson and Winter (1982) in their classic work had already made extensive use of the concept, which informed their analysis of organizational routines within an evolutionary perspective on technological change. In drawing attention to this concept, these authors helped revive widespread interest in the earlier work of Michael Polanyi, to the point where tacit knowledge has come to be recognized as a central component of the learning economy, and a key to innovation and value creation. Moreover, tacit knowledge is also acknowledged as a prime determinant of the geography of innovative activity, since its central role in the process of learning through interacting tends to reinforce the local over the global. For a growing number of scholars, this explains the perpetuation and deepening of geographical concentration in a world of expanding markets, weakening borders, and ever cheaper and more pervasive communication technologies. Recently, tacit knowledge has received considerable attention within the field of industrial economics (see for e.g. Cowan, David, and Foray 2000; Johnson, Lorenz, and Lundvall 2002), where a process of critical re-examination has begun.

Why are firms in some regions or nations so successful at adopting particular new production technologies and work practices while those in other places are not? What role do culturally defined characteristics, traits, and attitudes play in determining the degree of success in this process? Moreover, to what extent can such successful practices be replicated or ‘manufactured’ in other less fortunate locations? These questions figure prominently in a number of important debates, both theoretical and practical, and constitute the central issues of concern for this book. Scholars interested in the theory of regional and national economic development have, at least since the mid-1980s, engaged in a lively debate over the nature of change in the contemporary economy, and the forces producing such change. Considerable attention has been focused on the set of new production and innovation practices that many see as the foundation of firms’ competitive success in a period described variously as the era of post-Fordism. after-Fordism, ‘new competition’, ‘new social economy’, ‘knowledge-based economy’, or ‘learning economy’. These practices include the use of highly flexible, advanced manufacturing technologies, the reorganization of work inside the firm to enhance innovative capacity, improve quality, and increase responsiveness to changing market demands, and the restructuring of external relations—with customers, suppliers, and competitors—as firms supplement arm’s-length, market-based transactions with closer co-operation and collaboration to improve their responsiveness and innovative capability. The international literature in economic geography, industrial economics, economic sociology, political science, and management studies is now replete with case studies of individual countries and regions where firms have developed and employed such practices to great effect, enabling them to increase sales at home and abroad, and to maintain or expand their workforces. The most celebrated cases include Germany’s Baden-Wurttemberg, the Third Italy (especially the regions of Emilia-Romagna and Tuscany), Silicon Valley, and Japan’s Tokyo-Osaka corridor. In this multidisciplinary literature, interest has converged around a common theme: the role of culture in shaping the internal and external practices of firms.