Guest lecture on Knowledge economy and Urban Transformation

1. LECTURE
KNOWLEDGE-BASED
KNOWLEDGE BASED ECONOMY AND URBAN FABRIC TRANSFORMATION
Crossroads between innovation and urban policies in US, Finland, Singapore and Chile
GUEST LECTURER:
Juan Bl
J Blanco
LECTURER:
Jennifer Day
‘The Economies of Cities and regions’
The University of Melbourne
Melbourne, Victoria
9 September, 2010

4. Silicon Valley Historic Development
In Silicon Valley appears a new territorial location system, based in the proximity of
local actors.
Those actors are highly dependant on face to face contacts to continue their process
Those actors are highly‐dependant on face‐to‐face contacts to continue their process
of knowledge that characterize high technology industries
By the year 2008, it contained the most highly‐concentrated area of innovative firms
worldwide (More than 20.00 high‐technology firms are located in the area and
ld d ( h h h h l f l d h d
several services and supports firms are ‘clusterized’ in the area).

5. Multimedia Super Corridor, MALASYA
Corridor
Singapore Science Park, SINGAPORE
Dublin, IRLAND Guadalajara, MEXICO
Kansai Science City, JAPAN
Otaniemi Science Park, FINLAND
Park
Route 128 Massachustes, EEUU
Illinois Technology and Reseach
Stanford Research Park, EEUU Corridor, EEUU
Bangalore, INDIA Campiñas, BRASIL
Sofía Antípolis FRANCE
Antípolis,
Dalian Software Park, CHINA
Dresden, GERMANY
Taguspark, PORTUGAL Shanghai, CHINA
Cambridge T h l
C b id Technology park, UK
k
Telecom Corridor Dallas, EEUU Research Triangle North Carolina,
Tel Aviv, ISRAEL EEUU Zhon Guan Cun, CHINA
Chennai,
Chennai INDIA Casablanca Techno Park, MORROCO
Park
Melbourne, AUSTRALIA

6. Globalization and Urban Transformation
Nowadays, the most competitive metropolitan areas has been converted into complex
services platforms (De Mattos, et al. 2005)
In that context, competitive cities has developed specific structures for those processes
In that context competitive cities has developed specific structures for those processes
that are setting new challenges for its urban development:
 Its leadership is highly‐dependant of the innovation capacity within its territory
 This has accelerated the introduction of new building typologies that are affecting
the configuration of the pre existent urban fabric.
One of the most important outcomes of this process is the emergence of highly‐
concentrated productive processes in specific areas of the cities. In that context:
a) What is the role of the urban fabric in fostering and improving such
concentrations?
b) What are the critical characteristics that allows the innovation process?
c) At what point is it possible to improve its strengthens? From which urban policies?

7. Researcher in R&D Students
Number of computers in 1998 per 1000 inhabitants Number of cellular phones in 1998 per 1000 inhabitants

8. Knowledge‐based Economy and Localization theories
The localization of productive activities has been treated from different approaches ‐
sociological, geographical or economical, due to the understanding that a process of
profound transformation has been carrying out in recent years, affecting the
organization of production activities, where old hierarchical models has been
organization of production activities where old hierarchical models has been
replaced for flexible and decentralized structures of organization (Vázquez‐Barquero,
2006).
This shift has been strongly accelerated in the 21st century, and could be described by
two stages:
 A first stage where the knowledge is discovery as a determinant factor for the
A first stage where the knowledge is discovery as a determinant factor for the
development of the enterprises; and
 The current stage, initiated in the end of 1990s, where the role of knowledge is
directly related with the innovation capacity of the enterprise, putting strong
emphasis in the processes that allows its diffusion in an specific environment
(Dunning, 2001).

9. Knowledge Economy and Territory
Definition: The concept of Knowledge Economy seeks to describe the major
dependency on knowledge, information and skills from the public and private sectors.
(OECD, 2005)
This definition derives from the role of knowledge in the majority of the contemporary
economic theories, where stands‐out:
 Growth Poles Theory (Perroux): that bring forward the attraction capacity of those
enterprises with the ability of spread innovative practices and knowledge
 Innovation Clusters Theory (Porter): reinforce the role of interaction between firms
Innovation Clusters Theory (Porter): reinforce the role of interaction between firms
within a cluster to overcome technological needs (which give them an competitive
advantage)

10. 2002
PROXIMITY KNOWDLEDGE NATIONAL AND
DYNAMICS ECONOMY AND REGIONAL
Rallet / Torre / Gilly / LEARNING REGIONS INNOVATION
Pecquer / Bellet / Grosetti
Pecquer / Bellet / Grosetti Mansell / Machlup /
p SYSTEMS
Florida / Antonelli / Ferrao Lundvall / Cooke / Silva
1995
COMPETITIVIE INNOVATIVE MILIEU
ADVANTAGE OF
INNOVATION
AND INNOVATION
NATIONS AND +
NETWORKS
REGIONS TERRITORIAL
TERRITORIAL Aydalot / Mailiat /
Porter / Dunning / DEVELOPMENT Camagni / Storper /
Alburquerque Crevoisier
1985
INDUSTRIAL LOCAL AND
DISTRICTS AND ECONOMIC THEORY REGIONAL
LOCAL PRODUCTIVE OF INNOVATION AND DEVELOPMENT
SYSTEMS INNOVATION CYCLES
INNOVATION CYCLES h / /
Sthor / Quevit / Max‐Neef f
Becattini / Bellandi / Freeman / Soete / Dosi / / Friedman / Boisier /
Garafoli / Pyke / Sforzi / Pavitt / Rosenberg / Perez Vazquez‐Barquero
Ybarra
1975

11. National Diamond (Michael Porter)
Integrate previous works in competitive five forces theory (determine the competitive
intensity and therefore attractiveness of a market), value chain framework (chain of
activities for a firm operating in a specific industry) as well as his theory of
competitive advantage (position of a company in a landscape that allows higher
competitive advantage (position of a company in a landscape that allows higher
return earnings).
 Analysis of patterns of comparative advantage among industrialized nations.
 Looks at the sources of competitive advantage derived from the national context.
 It can be used both to analyze a firms ability to function in a national market, as
It can be used both to analyze a firms ability to function in a national market, as
well as analyze a national markets ability to compete in an international market.
 It recognizes four pillars of research (factor conditions, demand conditions,
related and supporting industries, firm structure, strategy and rivalry)
l d d i i d i fi d i l )
SOURCE: Michael E. Porter (1990), The Competitive Advantage of Nations, New York: Free Press

12. FACTOR CONDITIONS
RELATED AND SUPPORTING
DEMANDS CONDITIONS
INDUSTRIES
S S
STRATEGY,
STRATEGY STRUCTURE
AND RIVARLY

13. The Innovative Milieu*
… the set, or the complex network of mainly informal social relationships on a limited
geographical area, often determining a specific external ‘image’ and a specific
internal ‘representation’ and sense of belonging, which enhance the local innovative
capability through synergetic and collective learning processes
capability through synergetic and collective learning processes
(Camagni 1991, 3).
According to this theory, three main sets of elements mark creative/ innovative
milieus:
l
 Effective actor relationships within a regional framework;
 Social contacts that enhance learning processes,
 And image and sense of belonging.
External effects, favorable to creation, to location and to firms rooting ‐leading in fact
to regional growth‐ are due to the existence of a dynamic and located productive
system, of an innovative milieu.
system, of an innovative milieu.
* The notion of the innovative is mainly associated with the Groupe de Recherche Europeen sur les Milieux
Innovateurs (GREM I).
Innovateurs (GREM I).
SOURCE: Camagni, R., 1991, 'Introduction: from the local ‘milieu’ to innovation through cooperation
networks', in: Camagni, R. (ed.), Innovation Networks: Spatial Perspectives. Belhaven Press,
London, 1‐9.

14. METROPOLITAN AREA
Effective actor relationships within a regional framework
Social contacts that enhance learning processes
gp
Image and sense of belonging.
INNOVATIVE MILIEU
Private Structure
High‐Technology Firms
Risk Capital Firms
I+D Structure Industry Associations
Technology Parks Business Parks
Higher Learning
Institutions
Government Structure
Public Research Centers
Government Administrative Bodies
Public Financing Bodies

15. Knowledge and Territory
Nowadays, the prominent role of exchange and learning processes in addition to the
theoretical contributions of diverse disciplines has pointed to the relation between
innovation and territory as the key factor to understand the success or failure of
countries and regions in the knowledge economy paradigm
paradigm.
This relationship has been defined by the role granted to geographical and
institutional proximity, as a facilitator factor for exchange and diffusion of knowledge:
 Allows the reduction of transaction and negotiation costs
 Favored the improvement of profitability of its enterprises
(Vázquez‐Barquero, 2006).
Despite of that, most of those approaches have developed a strongly deterministic
view, since the success of a specific territory can not be exclusively associated to its
learning and knowledge capacity (Hudson, 1999).

16. Spatial characteristics of Innovation
The geographical and institutional proximity allows to improve the critical knowledge
and information transference to continuous innovation of its productive structures.
This characteristics are translated in diverse spatial configurations:
a) Knowledge generation poles: higher education institutions, public and private
research centers, science cities, etc.
b) Production hub of knowledge application: high‐technology firms, new industrial
districts, etc.
c) Technological and firm concentration areas for knowledge spreading: technology
Technological and firm concentration areas for knowledge spreading: technology
parks, new business centers, productive corridors, etc.

18. CLUSTERS: The Silicon Valley in the San Francisco Bay
An spontaneous concentration of activities due to urban development regulations,
land availability and local factors.
It presents a high technological content following with an use of research and
content,
innovation centers located in the area
It emerged from the incentive of professor from Stanford University towards its
students to form its own enterprises in the surroundings of the university, with the
aim to respond military research demand
Nowadays, it operates through the recognizable centrality of the Stanford University,
Nowadays it operates through the recognizable centrality of the Stanford University
in Palo Alto, connected with San Francisco and San Jose through the 1001 Highway,
airports and urban centers.
Gather more than 9.000 electronic companies and more than 5000 scientist, creating
an excellent innovation capacity that involves the whole region.

20. SAN FRANCISCO
BAY
METROPOLITAN AREA OF SAN
FRANCISCO BAY, CALIFORNIA, US
HIGH TECH FIRMS
LEISURE FACILITIES
HIGHER EDUCATION INSTITUTIONS
INNOVATION SERVICES
UNIVERSITIES

21. CLUSTERS: TI Cluster in Helsinki, Finland
Clusters systems established above a regional structure designed in a national level,
that includes university cities and fast‐growing areas
In its beginnings it was almost entirely focused in communication technologies due to
the complicated geography of the Finland territory. In later years, it has covered
several related technologies (micro electronics, mostly)
The parks networks of Helsinki covers a greater part of its urban area, mostly closed
to university, research and transport centers.
It represents a mix model within a metropolitan location but planned from the local
model,
government.
Based its strengthen in the promotion of leading national firms (NOKIA), supported
by a network of subsidiary firms and specific research centers.
It is financed with investment from big firms, the government and risk capital. Most
of the R&D activities are covered by the universities
universities.

23. METROPOLITAN AREA OF HELSINKI,
FINLAND
HIGH TECH FIRMS
LEISURE FACILITIES
HIGHER EDUCATION INSTITUTIONS
INNOVATION SERVICES
UNIVERSITIES

24. CLUSTER: Singapore, the TI Island
Public‐Private Model, planned, implemented and managed by the government,
supplying to the country with the necessary R&D infrastructure to attract high‐
technology firms
The innovation capacity is low, and most of them comes from foreign firms and big
government institutions.
It has been developed from the ‘Technological Corridor’ initiative, with an extension
of 15 kms. in the southern part of the island, planned to be implemented in three
stages.
The model it is supported with the lease of spaces within the Technology Parks, public
investment and return from R&D activities.

26. PORT METROPOLITAN AREA OF SINGAPORE,
SINGAPORE
HIGH TECH FIRMS
LEISURE FACILITIES
HIGHER EDUCATION INSTITUTIONS
INNOVATION SERVICES
UNIVERSITIES

27. The Role of Urban Planning
The learning capacity of a territory is a strong factor in the competitiveness of cities
and regions, but the role of the urban development, the change and adaptability of
its institutions are also been considered key factors too
(Vázquez Barquero, 2006).
(Vázquez‐Barquero 2006)
In that sense, the actors related with the production of knowledge, where outstand
Higher Education Institutions, had had a strong prominence since the emergence of
new policies and private initiatives based in strengthen those entities to encourage a
knowledge‐based development.

28. Table 2 – Expenditure on R&D and Patents (selected countries)
Patents granted by Patents granted by Total R&D Business R&D Effectiveness of
USPTO USPTO per expenditure as % expenditure as % R&D expenditure
million people of GDP of total (cost of each
expenditure patent in US$
millions)
CHILE 15 1.0 0.5 35 36.4
G-7 23.152 153 2.2 - -
AUSTRALIA 1.047 53 1.5 48 5.8
N.Z. 165 41 1.0 37 5.0
CANADA 3.893 123 1.9 55 4.1
FINLAND 944 181 3.4 70 6.0
MALAYSIA 63 3 0.5 - 10.6
Source: Machinea and Vera (2006)

29. The Chilean Case: Santiago as innovative Milieu
Santiago, the capital city of Chile, has undergone numerous changes in its urban
fabric due to the process of liberalization and globalization of its economy since mid
1980s.
The urban structure shows the consequences of this accelerated process of
development, affecting its social, physical and economical configurations, involving
the form and internal configuration of the city.
These processes, has been denominated by numerous authors (Castells, 2005, De
Mattos, 1999) as the 'globalization stage of Santiago'.
Even though the city has increased it competitive indexes[1], some authors are
concern with the real effects of this process, arguing that there is no real adoption of
'new leading activities' in its structure of production and that the city continues to be
a point of departure of commodities with few aggregate value (de Mattos, 2004;
Fuentes y Sierralta, 2004).
[1]
Santiago has been named 'Gamma City' by the Gawc in 2001; Ranked 3rd in living quality in
Latin America by MHRC (2003 y 2004); and ranked 1st best city for doing business (America
Economia, 2004).

30. The Issue: A stagnation in the competitiveness performance of the
country (Chile) and its capital city (Santiago): The Good
YEAR UNIT RANKING SOURCE
1990 CHILE 6,000‐12,000 USD CNIC
2005 (National Council of
* In 15 year has double the income per capita Innovation for
Competitiveness, Chile)
Competitiveness Chile)
2001 SANTIAGO GAMMA City GaWC
2004 (Globalization and World
* Level of globalization
Level of globalization Cities Research Network))
2003 SANTIAGO 3rd MHRC
2004 Quality of living in Latin America (Mercer Human
Resources)
2004 SANTIAGO 1st America Economia
City for doing business (Magazine)
2005 CHILE 27th WEF
2006 Global Competitiveness Ranking (World Economic Forum)

31. The Issue: A stagnation in the competitiveness performance of the
country (Chile) and its capital city (Santiago): The Bad
* Source: Banco Central de Chile
GDP GROWTH RATE, CHILE
8.00
7.00
6.00
5.00
TAGE
4.00
PERCENT
3.00
2.00
1.00
0.00
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
-1.00
YEAR

32. The Issue: A stagnation in the competitiveness performance of the
country (Chile) and its capital city (Santiago): The Ugly
YEAR UNIT RANKING SOURCE
2004 CHILE 0,68%
0 68% CNIC
(National Council of
Percentage of the GDP for R+D Innovation for
Competitiveness, Chile)
2007 SANTIAGO 1st America Economia
(Magazine)
* Lowest levels of intellectual productivity
and innovation in Latin America
2007 CHILE Public research system scarcely linked OECD
with the market
2008 CHILE 53rd WEF
WEF
(World Economic
State of Cluster’s development Forum)
2008 CHILE 51st WEF
WEF
(World Economic Forum)
Quality of scientific and research institutions

33. Moving towards a Knowledge‐Based Economy
In the Chilean case, the promotion of knowledge‐based activities is based in the
'cluster' approach, and can be seen in the preliminary objectives of the National
Council of Innovation for Competitiveness
(Eyzaguirre, 2007).
(Eyzaguirre 2007)
Based in the understanding that clustering –particularly clustering of biotechnology
and ICT activities, is not related to physical comparative advantages, as one might find
with natural resource clusters, e.g. salmon aquaculture or mining, the case of high
technology enterprise concentrations in Santiago could prove the emergence of a
innovative milieu (Castells y Hall, 1994), where its competitive advantage came from
unexpected urban interactions between private agents, minimum regulations and
unexpected urban interactions between private agents minimum regulations and
localization advantages.
“We understand the innovative milieu al the system of social, institutional,
organizative, economical and territorial structures that create the conditions for a
continuum generation of synergies and its investment in a process of production that
emerge from that synergic capability, as well as its units of production that are part of
this milieu as for the milieu as a whole
this milieu as for the milieu as a whole”
(Castells y Hall, 1994: 363)

35. In search for a Chilean‐Model: recent initiatives
In recent years, numerous initiatives intended to capitalize high‐technology
concentrations helped by the framework given in the National Innovation System
initiative.
The typology of those projects has been:
 Research and Development Centers (R&D)
 Research Universities
 Public Research Centers
 Venture Capital firms
 Innovative Firms
Innovative Firms
 Business Incubators
The ones related with the high technology sector are mainly clustered in Santiago,
and has been based in the 'Technology Park' typology, located in suburbs,
disconnected from the traditional networks of research and knowledge that the city
had developed.

36. Table 1 – Territorial projects related with research, business and innovation
Year Name Location
1991 Observatorio VLT Cerro Paranal
1995 Parque Científico y Tecnológico UCH
UCH* Pudahuel,
Pudahuel RM
1997 Ciudad Empresarial* Huechuraba, RM
1998 Parque de Negocios ENEA* Pudahuel, RM
2000 Ciudad de CURAUMA* Placilla, V
2006 Parque Tecnológico Ciencias para la Vida* Ñuñoa, RM
2007 Centro Científico Valdivia, IX
2008 - ongoing Parque Tecnológico U de Concepcion* Concepcion, VIII
Edificio del Software GECHS Santiago, RM
*Consider the Research Park typology in its master plan design
Source: Blanco (2008)

41. High Technology meets Natural Resources
The National Council of Innovation for the Competitiveness focused its policies in
adding value to the traditional natural resources sectors that have built the Chilean
economy, through new methods and knowledge.
A special emphasis was given to those economic activities recognized as 'cross‐
cutting' to development of the innovative capacity ‐the Information and
Communications Technologies (ICT) and Biotechnology (BIOTEC).
The main issue in implementing this strategy lays in the disconnection between those
two activities:
 Natural resources activities were clustered mainly in the northern (e.g. copper in
Antofagasta) and southern (e.g. salmon and forest Puerto Montt) cities
 High technology activities were clustered in the Metropolitan Area of Santiago
(MAS), due to its concentration of Higher Education Institutions (HEIs),
economical power, administrative government and urban services of high
standard
standard
(Rosas et. al, 2006)

42. Clusters based in natural Mining
resources promoted in the
Chilean territory
Astronomy
Biotechnology
Winery
Forest
F t
Salmon
Eco Tourism
1. Northern System 2. Central System 3. Metropolitan System 4. Southern System 5. Austral System
Mining Wine Biotechnology Salmon Eco Tourism
Astronomy Wood Astronomy Eco Tourism Energy
Eco Tourism Astronomy Higher Education Sea Water
Fruit Native Forest Native Forest
Agroindustry
Source: Ugarte et al (2007)

43. Metropolitan Central region
Source: Blanco (2008)

44. Urban and regional structure of the
Metropolitan Central region
Source: Blanco (2008)

45. Regional Clusters
Winery Valley
Transport Hub
Agriculture
Fruit
Culture Port
TI industry
y
Biotech industry
Higher Education agglomeration
Source: Blanco (2008)

46. Technology Corridor Santiago‐Valparaiso
Source: Blanco (2008)

47. Innovation Capacity in the Chilean Territory
Several studies detects that “the capacity of innovation of its territories is weak” (Rosas,
et al. 2006). This phenomenon, according to Brunner y Elacqua (2003) it is a
consequence of:
i. A precarious common infrastructure of innovation
ii. A weak development of innovation clusters
iii. A scarce linkage between clusters and common infrastructure of innovation
In the last years, it has appear a strong drive to improve the innovation capacity of the
In the last years it has appear a strong drive to improve the innovation capacity of the
country, through:
a) The incensement and strengthen of infrastructure for research
b) The development of its most competitive industries through cluster models
(Rosas, et al. 2006)
(Rosas et al 2006)

49. Knowledge structure of the Metropolitan
Area of Santiago (MAS)
Source: Blanco (2008)

50. Enterprise structure of the Metropolitan
Area of Santiago (MAS)
Source: Blanco (2008)

51. Mechanism for innovation structure of the
Metropolitan Area of Santiago (MAS)
LEYEND
Tech. & Business Parks Business Incubators Intellectual and Patents Institutions
A Inno. & Tech. Transfer Centers 5b Technological Consortiums Technology Nodes
Time access to the New Business Center
Source: Blanco (2008) 5 5‐10 10‐20 20‐30 30‐60 60‐+

52. BIOTECH and IT in Santiago: Patterns of Development
 The biotechnology activities in the area around Marathon Avenue emerged
during the 1990s as a nascent sector associated with the non‐traditional natural
resource exporting industries and its proximity to Campus San Joaquin of the
Universidad Catolica de Chile, following the pattern of other biotechnology
Universidad Catolica de Chile following the pattern of other biotechnology
concentrations in the world (see Farias, 2005).
 The concentration of firms in the IT sector was apparent in the historical centre of
Santiago by the end of 1970s. Those early firms help the process of
modernization of the old public enterprises and its conversion into private‐owned
firms. During the 1990s the new IT firms migrate next to the new Business District
in El Golf neighborhood, were the headquarters of global enterprises were
in El Golf neighborhood were the headquarters of global enterprises were
attracted in respond of the new policy of open economy of the country.
Due to the relatively recent development of these two sectors in the Chilean case,
and their specifically knowledge‐based components, there are relatively little facilities
to support its development.
In many ways, the current national innovation policy seeks to transform this trend in
In many ways the current national innovation policy seeks to transform this trend in
order to create the synergies necessaries to stimulate development in key strategic
technology areas.

53. Urban Structure
TI INDUSTRY
Urban Structure
BIOTECH INDUSTRY
Urban Structure
HUMAN, INSTITUTIONAL AND FINANCIAL RESOURCES
Urban Structure
KNOWLEDGE GENERATION
KNOWLEDGE GENERATION
Urban Structure
MECHANISM FOR INNOVATION
Urban Structure
Urban Structure
METROPOLITAN AXIS

54. Leyend
METROPOLITAN AXIS
KNOWDLDGE GENERATION
TI INDUSTRY
BIOTECH INDUSTRY
MECHANISM FOR INNOVATION
HUMAN, INSTITUTIONAL AND FINACIAL
RESOURCES