Social Implications of Developing a Knowledge-based Economy in HK  (McConnachie & Lung 18 Sept 2013)
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Social Implications of Developing a Knowledge-based Economy in HK (McConnachie & Lung 18 Sept 2013)

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A discussion on the social implications of developing Hong Kong into a Knowledge-based Economy.

A discussion on the social implications of developing Hong Kong into a Knowledge-based Economy.

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    Social Implications of Developing a Knowledge-based Economy in HK  (McConnachie & Lung 18 Sept 2013) Social Implications of Developing a Knowledge-based Economy in HK (McConnachie & Lung 18 Sept 2013) Document Transcript

    • 1                   Social implications of developing a knowledge-based economy in Hong Kong Dr. Gordon McConnachie Founding Chairman, Scottish Intellectual Assets Centre & Chief Technology Officer of Asia Pacific Intellectual Capital Centre gmcconnachie@apicc.asia Mr. Alan Ka-lun Lung Director & General Manager Asia Pacific Intellectual Capital Centre, Hong Kong SAR, China alanlung@apicc.asia 18 September 2013        
    • 2 Abstract     This paper examines whether the knowledge‐based economy can provide a further  opportunity for Hong Kong to upgrade its economic position and provide a means of  redistribution of upward mobile economic opportunities to its citizens, particularly  the younger and more educated younger generation. It examines the social and  economic development opportunities presented to Hong Kong in the context of the  development model of Silicon Valley of California, the economic development  strategy taken up by the European Union, and the options that ASEAN is likely to take.  Hong Kong already has the necessary conditions to build a Silicon Valley type of  economic development. The weaknesses, strengths and unrealized economic  potential have been pointed out by others. Hong Kong should continue to innovate  and transform itself from an export‐dependent manufacturing centre into one of the  world's leading financial centres. Clear policy statements are however needed;  nothing will happen if no resource is allocated in the next Budget Speech in February  2014.       Introduction   Our question is this: can the Knowledge‐based Economy (KBE) provide a further  opportunity for Hong Kong to upgrade its economic position? Put in terms more  meaningful to Hong Kong Citizens: how far can the KBE provide a means of  redistribution of opportunity? The economy of Hong Kong is well developed, but  there is a need to provide opportunities especially for younger and well educated  citizens while considering also the wellbeing of all citizens. Let us first take a step  back from the question at hand and look at how people and regions grow and seize  opportunities.     Personal motivation factors  The  opportunities  presented  by  the  KBE  bear  fruit  when  people  apply  their  intelligence to solving problems and creating solutions for which there is a market  need.  An  article  in  The  Economist1  argues  that  there  is  an  inherent  genetic  component to intelligence, as well as a nurturing effect, meaning that intelligence is  assisted  to  grow  when  a  climate  is  present  surrounds  the  individual  encouraging  personal development.  The application of intelligence will be higher when a person  is motivated. According to Wikipedia2 , “there is general consensus that motivation  involves three psychological processes: arousal, direction, and intensity. Arousal is  what initiates action. It is fueled by a person's desire for something that is missing  from their lives at a given moment. Direction refers to the path employees take in  accomplishing the goals they set for themselves. Finally, intensity is the vigor and  1 “Cleverer Still”, The Economist, 22 December 2012, available http://www.economist.com/news/science-and-technology/21568704-geniuses-are-getting-brighter-and- genius-levels-iq-girls-are-not-far (viewed 4 September 2013). 2 “Work Motivation”, Wikipedia, available http://en.wikipedia.org/wiki/Work_motivation (viewed 4 September 2013).
    • 3 energy employees put into this goal‐directed work performance. These psychological  processes result in four outcomes. Motivation serves to direct attention, focusing on  particular  issues,  people,  tasks,  etc.,  and  to  stimulate  an  employee  to  put  forth  effort,      to persist,  preventing  one  from  deviating  from  the  goal‐seeking  behavior  and to have task strategies, which, as defined by Mitchell & Daniels3 , are "patterns  of behavior produced to reach a particular goal”.     While  innovation  springs  from  the  actions  of  self‐empowered  and  self‐motivated  individuals,  the  creation  of  a  supportive  environment  can  help  many  would‐be  entrepreneurs enter the field. This comes into sharper focus when we take a look at  some regions in the world which have most successfully grabbed the opportunities  presented by the KBE.      Stimulating a region ‐‐ the Silicon Valley case  Silicon  Valley  in  California,  widely  recognised  as  the  most  successful  knowledge  region in the world, has released the potential in people and provided a stimulus for  innovation in many ways, both natural and man‐made. As Brad Templeton (2012)  noted in Forbes Magazine4 , a combination of factors came together to favor the San  Francisco Bay Area. It was the free and open culture, the free Government spending  in the early days, the large pool of knowledge in the people who moved there, their  go‐ahead spirit and easy access to capital? There is one further critical element: in  the late 1990s over 50% of the owners and CEOs in Silicon Valley were born outside  the USA.     We see a similar collection of factors in the more recent success stories Israel and  Singapore, including a focus on immigration to bring the best intelligence possible to  bear on the opportunities.    If these factors are missing it is so much harder to create a region dominant in  applying the knowledge approach. Tech guru Marc Andreessen5  stated “although  Beijing has great potential to be the next Silicon Valley, it probably never will be.  Despite great engineering talent and enormous market, its lack of openness is a  serious liability.”   Why is it so hard to create another Silicon Valley? How should a society encourage  innovation?  Why are some places with great technical talent (like the former Soviet  Union) seemingly unable to produce innovative firms?  3 Mitchell, T.R.; Daniels, D. 2003. Motivation. Handbook of Psychology, Vol. 12. Industrial Organizational Psychology, ed. W.C. Borman, D.R. Ilgen, R.J. Klimoski, pp. 225–54. New York: Wiley. 4 Brad Templeton, “ The Real Secrets Behind Silicon Valley’s Success”, Forbes Magazine, 11 July 2012 available http://www.forbes.com/sites/singularity/2012/07/11/the-real-secret-behind-silicon- valleys-success/ (viewed 4 September 2013). 5 Greg Satell, “The True Secrets of Silicon Valley”, 7 August 2013 available http://www.forbes.com/sites/gregsatell/2013/07/08/what-makes-silicon-valley-unique/ (viewed 4 September 2013).
    • 4   The European Union  In Europe we see the beginnings of a trend leading toward the creation of more and  more high‐performance regions. The Lisbon Agenda set the stage and the “Lisbon  Strategy for growth and jobs, launched in 2000 by the European Council, was the  EU's joint response to facing the challenges of globalisation, demographic change  and the knowledge society. It aimed at making Europe more dynamic and  competitive to secure a prosperous, fair and environmentally sustainable future for  all citizens.6 ” In a further step, “The Europe 2020 Strategy" identifies three key  drivers for growth, to be implemented through concrete actions at EU and national  levels:    • Smart growth (fostering knowledge, innovation, education and  digital  society),  • Sustainable growth (making our production more resource efficient while  boosting our competitiveness) and  • Inclusive growth (raising participation in the labour market, the  acquisition of skills and the fight against poverty).    These initiatives are of course political in nature and only provide a framework  backed up by central funding. The real work remained to be done at the regional  level and within individual companies. The European Commission provides one  further world class asset in Enterprise Europe Network7 , which “helps small business  make the most of the European marketplace. Working through local business  organisations, EEN helps:   • Develop your business in new markets,  • Source or license new technologies,  • Access EU finance and EU funding.”    Thus there is a support framework both at the European and local level which has  helped spur the growth of Europe’s technology regions. In a recent report8  the  Innovation Intensity across the European Union is reported in detail: the report will  be used to better target support measures on a regional level with a view to  stimulating the environment for promoting innovation. The programme is  demonstrating success as leading regions begin to appear in countries which  themselves are not regarded as the most technologically advanced, e.g. East of  England which is a Leader region in a country the UK which is at a Follower level.    6 European Commission, Education and Training, available http://ec.europa.eu/education/focus/focus479_en.htm (viewed 4 September 2013). 7 Enterprise Europe Network, available http://een.ec.europa.eu/ , (viewed 4 September 2013). 8 European Commission, Enterprise and Industry, ”Regional Innovation Scoreboard 2012”, available http://ec.europa.eu/enterprise/policies/innovation/files/ris-2012_en.pdf (viewed 4 September 2013).
    • 5 Centres of innovative excellence across the EU are created and exist at a regional  level but are supported by country infrastructure. There is also evidence of a positive  immigration effect in Europe: Ozgen, Nijkamp and Poot9  (2011) in a study covering  170 regions in Europe demonstrated that “innovation is clearly a function of regional  accessibility, industrial structure, human capital, and GDP growth. In addition, patent  applications are positively affected by the diversity of the immigrant community  beyond a critical minimum level.”      All of these indicators argue for positive involvement of Government in promoting  GDP and quality of life growth through targeted support for innovative activity.    The ASEAN Nations  The ASEAN Nations are very diverse in their development. Singapore, with intense  government support, is now on an equal footing with the most developed nations in  the world. Malaysia is following suit with MATRADE10 , The National Trade Promotion  Agency, playing a lead role in helping companies bring innovations out into the rest  of the world.     As ASEAN Integration continues and improved social welfare programmes and living  standards result, new sources of funding will be required and ASEAN will turn more  and more to innovation and the KBE as opportunities.     Social and economic development opportunity presented to Hong Kong  At present there is a window of opportunity for Hong Kong to be a leader, using its  special advantages, not only for leading economic development in China but also for  assisting Europe and the ASEAN Nations in building their economies. There is a battle  of wills currently between those, in business and government circles, who see these  opportunities and those who are determined to do nothing. In taking advantage of  these opportunities the Hong Kong community as a whole will require Government  support. Without clearly stated policies in the Policy Address11  (Chief Executive of  Hong Kong on 15 January 2014), nothing will happen as this speech drives policy  measures and resource coordination allocated in the 2014‐2015 Budget Speech  (Financial Secretary 26 February 2014).      Mainland China cannot provide answers for Hong Kong                                                                            Hong Kong ranks as the 7th most competitive "country" in the world according to  the 2013‐2014 Global Competitiveness Report12 , and as the 7th  most innovative  9 Ceren Ozgen, Peter Nijkamp and Jacques Poot, “Immigration and Innovation in European Regions”, NORFACE MIGRATION Discussion Paper No. 2011-8, available http://www.norface- migration.org/publ_uploads/NDP_08_11.pdf (viewed 5 September 2013). 10 MATRADE, The National Trade Promotion Agency of Malaysia, accessible http://www.matrade.gov.my/en/foreign-buyers/industry-capabilities/malaysian-innovation (viewed 5 September 2013). 11 HKSAR Government Press Release dated 26 June 2013: http://www.info.gov.hk/gia/general/201306/26/P201306260367.htm 12 Hong Kong's Profile on Page 210-211, The Global Competitiveness Report 2013-2014 published by the World Economic Forum http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2013-14.pdf
    • 6 economy globally and most innovative in Asia according to the Global Innovation  Index 201313 . Hong Kong is a high cost and developed economy, a "country" that  needs to be "innovation driven" and not "efficiency driven". The Central People's  Government of China cannot provide the answers to Hong Kong's social and  economic development as Mainland China's solution may not work in the free  environment of Hong Kong.     Hong Kong has a narrow industrial base and her only natural resource is her human  capital. This situation has not changed since the early 70s when Hong Kong started it  development into a modern economy. Hong Kong, however, has since become a  matured and developed economy. The introduction of competition law and Hong  Kong’s overall development means time for the rent‐seeking behavior of legal  oligopolies is running out. Hong Kong needs to recognize that innovation ‐‐ not  sticking to the status quo ‐‐ is the answer for the future.  Social development that  focuses on "redistribution of wealth" between the rich and the poor cannot be the  answer.  Social capital has the same foundation as economic capital – only more  intangible. Hong Kong must become aware that the opportunity offered by building  an innovative economy also means providing a more level playing field and a  "redistribution of opportunities" to all.  A developed Knowledge‐based Economy is  knowledge‐driven. Wealth creation capacity is driven by "knowledge" and  "entrepreneurial skills" ‐‐ money and inherited wealth are secondary to knowledge.  Financial capital is abundant in Hong Kong: it can be provided by a realignment of  the innovation supply chain and by venture capitalists.       Political and policy leadership needed  There is a strong mismatch between Hong Kong's innovation capacity and its  economic ranking in the world. According to the World Economic Forum and Global  Innovation Index (GII), there is also a strong mismatch been Hong Kong innovation  output and economic efficiency.  Low innovation output could be linked to a lack of  understanding of the wealth creation power of knowledge or intangible capital.  Hong Kong does not have much experience in building a "Silicon Valley" type of  economic structure but already has all the necessary conditions needed to make this  happen14 . The absence of a comprehensive innovation policy put forward by the  HKSAR government has also created supply chain issues that cause high knowledge  absorption but low knowledge output and commercialization. Hong Kong needs to  understand that innovation output is not just scientific R&D: it is also about  innovation ‐‐ including social innovation ‐‐ and creating wealth and upward mobile  opportunities for its citizens. Hong Kong is ideally placed to commercialize scientific  output from mainland China, from Europe and from around the world ‐‐ this is  innovation without a deep pocket and heavy investment in R&D.   13 Hong Kong's Profile on Page 184, The Global Innovation Index 2013 published by Cornell University, INSEAD and WIPO http://globalinnovationindex.org/content.aspx?page=gii-full-report-2013 14 An article by dated 20 March 2013 rated Hong Kong as the first amongst four cities after New York (#1 Hong Kong, #2 Washington D.C., #3 Tel Aviv, #4 London) that is most likely to follow the footstep of Silicon Valley to become an innovation and technology hub. Rebecca Fannin who contributed to Forbes's finding said it was Hong Kong's unrealized potential that makes Hong Kong worth watching.
    • 7   The HKSAR Government can inspire hope and support knowledge‐intensive SMEs  and SME start‐ups. A meeting of minds is possible between the younger generation  and the political leadership in building Hong Kong’s innovation eco‐system and social  innovation systems. Support from the business community, law makers and the  general public is essential to build a sustainable social and economic structure. The  best chance for change in Hong Kong is for the Steering Committee on Population  Policy headed by Carrie Lam, Chief Secretary to include human resources and  economic development in the forthcoming population policy public consultation. In  the economic arena, someone from within the Economic Development Commission  headed by the Chief Executive needs to put forward solid innovation and technology  policy measures, so that they can be included in the forthcoming 2014‐2015 Policy  Address and Budget Speech for implementation of a knowledge‐based economy in  Hong Kong in the next ten to twenty years.      In the battle of wills where one side believes that innovation is not needed and will  do nothing, someone or some groups within and outside the HKSAR Government  needs to break the “standing order” of doing nothing. There is no guarantee that  those who favor innovation will come out on top, but there is safety in  ‐‐ something  is bound to happen if more people keep pushing the Chief Executive of Hong Kong  and the HKSAR Government for positive changes.       One benefit could be a radical change for certain neighbourhoods in Hong Kong.  Higher‐value jobs bring money into the community, profits into SMEs and  stimulating life challenges. More importantly they bring stimulation, opportunity and  involvement: this will be reflected in a feeling of value, engagement and self‐ motivation. All of these factors have a positive influence on community life. 
    • 8 About the authors Dr. Gordon McConnachie, B.Sc., Ph.D Dr Gordon McConnachie is the founding Chairman of the Scottish Intellectual Assets Centre (2003- 2007) and Chief Technology Officer of Asia Pacific Intellectual Capital Centre. He is a chemical engineer by training and he spent most of his working career with Dow Chemical where he grew up together with the innovation and technology transfer systems of the world as we know them today. At Dow Chemical Europe (1989 - 1999), he invented the IP and Intellectual Assets Management System for the worldwide company together with Phil Barnett and Gordon Petrash. The system was later modified and applied across the global company, where Gordon transferred technologies from companies and universities into Dow Europe which brought him into intimate contact with the EU Innovation Relay Centres (now Enterprise Europe Network). From 1999 to 2002 Gordon directed the European Intellectual Asset Management Services of PricewaterhouseCoopers. In 2009, 2010, 2011 and 2012 Gordon was placed on the Global IAM 250 list of leading IA Strategists, one of only a handful of experts on the list from China and the ASEAN Nations. Dr Gordon McConnachie can be contacted at: gmcconnachie@apicc.asia. Mr. Alan Lung Ka-Lun Alan Lung Ka-lun was born and educated in Hong Kong. He was also educated at the University of Wisconsin in the USA and Wilfrid Laurier University in Canada. He chairs the Hong Kong Democratic Foundation (www.hkdf.org), a political and public policy think tank founded in 1989. Alan is skilled in converting his knowledge of governments and public policies into practical steps to move forward “Knowledge Economy” initiatives. He is a member of the Innovation and Technology Advisory Committee of the Hong Kong Trade Development Council (HKTDC) and he has been promoting innovation and technology practices in Hong Kong, Guangzhou and Beijing through the Asia Pacific Intellectual Capital Centre (www.apicc.asia) (where he is Director and General Manager), since 2006. Alan Lung Ka-Lun can be contacted at: alanlung@apicc.asia.