Sheehan, Peter, Houghton, John, Jolley, Ainsley, Johnston, Ron and Morris, Peter (2002) Directions for Industry Policy in Western Australia within the Global Knowledge Economy: Sustainable Prosperity through Global Integration. Other. Western Australian Technology and Industry Advisory Council.

Abstract

The starting point for this study is the fact that globalisation and the transition to a knowledge-based economy are driving a transformation of the nature and structure of the world economy. The rise in the knowledge intensity of economic activities and the increasing globalisation of economic affairs are driving pervasive change affecting every industry, firm, individual and region. This transformation is not a matter of one or two technologies or industries. Nor is it just another way of emphasising the ICT revolution or any particular new technology, such as biotechnology. These are all important, but they are not the whole story. Knowledge generated on a global basis is being applied to all industries, and many existing industries are very advanced. For example, the Australian mining industry is a global leader in innovation and development. The response of existing industries will be as important as the creation of new industries, and will give rise to many new business opportunities. In seeking to understand emerging trends, much of the contemporary literature emphasises the systemic nature of relationships and activities in the economy. The systemic approach recognises a whole range of non-market linkages that are central to the economic system (such as organisational and institutional persistence, cooperation, alliances, information exchange and mutual dependency), as well as the role of organisations other than firms. This systemic character is of three main forms. One is the persisting influence of past events on present and future outcomes (path dependence). The second is the complex linkages between many different institutions and organisations at a given point of time, such as those that determine the level of innovation (the innovation system). The third is the linkages between the various aspects of a complex system involved in the creation, production and distribution of a product, or a set of products (the product system). Recognition of this systemic character has many important implications for policy. They include the need to focus on a region’s innovation system and on the positioning of its firms within global product systems. This systemic character also implies that, however urgent and transformative it is, change must be evolutionary, with a progressive strengthening of the organisations, institutions and systems supporting regional growth. The major elements in the global knowledge economy all impact on the choices made by firms about where to locate their activities. These impacts may weaken the position of many economies. Indeed, the new technologies have made possible the consolidation of particular aspects of the product system in preferred locations on a global basis. This has led to the ‘hollowing out’ of peripheral regions in many important respects. Thus a central challenge facing many economies is to use the increased access to global markets and information sources that the new economy makes possible to offset the impact of global consolidation on the structure of their economies.

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