INTELLECTUAL CAPITAL AND PERFORMANCE

INTELLECTUAL CAPITAL AND PERFORMANCE: AN EMPIRICAL STUDY ON THE RELATIONSHIP BETWEEN SOCIAL CAPITAL AND R&D PERFORMANCE IN HIGHER EDUCATION
MOHD ISKANDAR BIN ILLYAS and ROSE ALINDA ALIAS
Faculty of Computer Science and Information Systems, Universiti Teknologi Malaysia,
81300 UTM Skudai, Johor, Malaysia
E-mail: iskandar@fsksm.utm.my & alinda@utm.my

LEELA DAMODARAN
Information Science Department, Loughborough University,
Leicestershire, LE11 3U, United Kingdom
E-mail: l.damodaran@lboro.ac.uk
Based on the analysis of research groups in higher education in the UK, this paper investigated the relationship between social capital and the performance of those research groups. The study produced a model that considered the different dimensions of social capital and how these dimensions might have an impact on the performance of R&D in the HEI in the UK. The result from the regression analysis shows that trust has the strongest influence towards explaining the R&D performance.
1. Introduction
Social capital is a valuable and inimitable resource that leads to competitive advantage in research and development (R&D) groups. Previous studies have shown that social capital can improve organisational performance through effective networks, higher level of trust, and shared vision and understanding. Although several studies have measured the effects of social capital, there are no studies investigating the impact of social capital on research and development at a group level in Higher Education (HE). The aim of this study was to understand the effects of social capital on R&D performance in higher education. In order to achieve the aim, two objectives were identified, including the examination of different social capital dimensions on R&D performance, and the development of a social capital and R&D performance model.
2. Literature Review
In the following section we define social capital in some depth and then extend the concept to explain how social capital affects innovation in higher education. We look into the relationship between social capital and R&D processes within higher education and how it might affect its performance. We put forward several proposition to support our arguments based upon our conceptual model. Finally, we provide the findings from the analysis of data and outline some recommendation from the findings.
2.1. Social Capital
Social capital is the sum of the actual and potential resources embedded within, available through, and derived from the network of relationships possessed by an individual or social unit (Nahapiet & Ghoshal, 1998). It comprises the assets that may be mobilized through a network. It makes an organization, or any cooperative group, more than a collection of individuals intent on achieving their own private purposes. Its characteristic elements include high levels of trust, robust personal networks and vibrant communities, shared understandings, and a sense of equitable participation in a joint enterprise. These kinds of relationships support collaboration, commitment, ready access to knowledge and talent, and achievement of organizational goals. Social capital requires appropriate organizational investments – providing people space and time to connect, developing trust, effectively communicating aims and beliefs, and offering the equitable opportunities and rewards that invite genuine participation, not mere presence. But even when social capital investments are made solely by individuals who develop ties with one another, many real advantages accrue to the organization as a whole.
Researchers have used the social capital construct to explain different dimensions of human capital that span multiple levels of analysis from organizational learning (Huber, 1991) to a resource-based view of the firm (Barney, 2001). Theoretical advances in this field have forwarded the structural, relational and cognitive dimensions but these have not been equally balanced in empirical studies. Like "physical capital and human capital-tools and training that enhance individual productivity—'social capital' refers to features of social organization, such as networks, norms, and trust, that facilitate coordination and cooperation for mutual benefit (Putnam, 1993)."
Social capital, like other forms of capital, accumulates when used productively. Traditional economic perspectives that focus on short-term self interest and individual transactions ignore the accretion, or growth, opportunities of cooperation (Ostrom, 1990). Closely related to accretion is the self-reinforcing cyclic nature of social relations. Trustful relations tend to be self-reinforcing in the positive direction. Mistrust tends to cycle in the negative direction.
Nahapiet and Ghoshal (1998) present a theoretical model of social capital and propose three dimensions – structural, cognitive, and relational in order to facilitate the various combinations and exchange of resources within firms. However, the model doesn’t consider the deeper cultural aspects, which are intrinsic in developing strong social relationships among members of organizations. Although the relational and cognitive dimensions have some connection with organizational climate, these tend to focus on superficial manifestations of organizational culture.
3. Social Capital and R&D Performance: A Research Model
Investments in human and social capital are widely believed to improve the organizational performance (M. K. Ahuja, Galletta, & Carley, 2003; Annen, 2003; Bosma, Praag, Thurik, & Wit, 2004; Dess & Shaw, 2001; Knack, 2001; Knack & Keefer, 1997; Koka & Prescott, 2002; Lesser & Storck 2001; Tsai, 2003). However, there also has been recognition of the potential risks and pitfalls inherent in utilizing social capital (G. Ahuja, 2000; Brass, Butterfield, & Skaggs, 1998; Shaul M. Gabbay & Leenders, 2001; S. M. Gabbay & Zuckerman, 1998; Hansen, 1999; Leana & Van Buren, 1999; Edwin A. Locke, 1999; Portes, 1998). Nevertheless, the notion of social capital has been moved beyond general or specific literature on concepts as trust and networks to explore concepts which help the development of a dynamic rather than a static concept of social capital (Edelman, Bresnen, Newell, Scarbrough, & Swan, 2004).
Here we advance a model that connects the independent and dependent variables of this construct. The model, shown in Figure 1, suggests that the R&D performance in higher education is influence by the pattern of social capital among the member of the academics.


Fig.1 Social Capital and R&D Performance
3.1. Structural Dimension – Collaborative Network
The studies on organizational social network were perhaps the most studied area among the different dimensions of social capital (Burt, 2000; Coleman, 1990; Granovetter, 1973; Hansen, 1998; Nohria & Eccles, 1992). However, there is a lack of agreement regarding how these dimension influence the organizational outcome. Empirical findings range from the degree of network centrality and its effect on levels of perceived trustworthiness (Tsai & Ghoshal, 1998), new linkage creation (Tsai, 2000), levels of innovation (Tsai, 2001), and levels of intra-organizational knowledge sharing (Tsai, 2002).
Harvey et al. (2002), in their research indicates that high-achieving research groups are aware and adept at leveraging this ‘network advantage’. Similarly, the new production of knowledge conceptualizes knowledge as deriving not merely from individual thought but from collective processes of networking, negotiation, inter-personal communication and influence. The network of contacts sustains the group as a whole. It aids competition, strategic sense-making, collaboration and staff recruitment. It is central to exploiting existing internal and external competencies to respond appropriately to a changing environment by configuring and reconfiguring the internal and external organizational skills, resources and competencies to align with the changing environmental contingencies. Collaborative working is intimately related to networking; it represents ultimately a networking of resources: social, intellectual and infrastructural. Network connectedness is a crucial component of high-achieving research groups (Harvey et al., 2002). Therefore, we posit the following:
Hypotheses 1: The existence of collaborative networks among group members will have a positive effect on their R&D performance.
3.2. Relational Dimension – Trust
The notion of trust within the organisation arises as an important dimension for scholars of social capital (Coleman, 1990; Fukuyama, 1995: Putman, 1995). Several researchers have studied the relationship between trust and performance. However, the outcome of the above research has given varying results, whereby performance of a group or individual may or may not have been affected by the level of trust among the individual or group members. Among the research that established a positive relation between trust and performance are the studies of McAllister (1995) and Barclay (1997), while Dirk’s (1999) study shows that trust doesn’t have any significance on team performance. One of the main reasons for the variations between the results is the type of constructs used to measure the level of trust,. While some of the research used a single dimension (attitude, belief) to measure trust, other researchers explore trust from multidimensional perspectives (Costas, 2003). Hence:
Hypotheses 2: High level of trust among group members will have a positive effect on their R&D performance.
3.3. Cognitive Dimension – Shared Visions
Past studies have found that setting specific goals facilitates overall performance (Edwin A Locke & Latham, 1984). However, McComb et al. (1999) advanced the idea beyond goal setting to suggest that individuals involved in R&D activities need to have a shared understanding of the requirements in innovation activities so that they can have a common foundation or understanding upon which to act. For example, when individuals involved in R&D activities have a common or overlapping understanding of the organisation’s innovation objectives, their responsibilities toward these objectives and the procedures they use to attain these objectives will be more coordinated as they share compatible knowledge. This shared mental framework (Janis A Cannon-Bowers, Salas, & Converse, 1993) facilitates decision-making and coordination so that individuals can conduct their tasks without a continuous process of interpreting and reinterpreting the meanings and expectations of the innovation process (Lynn, Reilly, & Akgun, 2000). Klimstra and Potts (1988) reported that by aligning everyone’s views toward a common framework based on shared expectations and agreement, higher levels of project success occurred. Shared visions affect task performance in the sense that when team members have similar attitudes/ beliefs, “they arrive at compatible interpretations of the environment, which enable them to reach better decisions” (J. A. Cannon-Bowers & Salas, 2001). Therefore, it is hypothesised that:
H3a: The group’s level of shared vision is positively related to their R&D performance
3.4. Cognitive Dimension – Shared Language
Language is the means by which individuals engage in communication. It provides a frame of reference for interpreting the environment and its mastery is typically indicated by an individual’s level of expertise (Wasko & Faraj, 2005, p. 41). Nahapiet and Ghoshal (1998) argue that to the extent that people share a common language, this facilitates their ability to gain access to people and their information. To the extent that their language and codes are different, this keeps people apart and restricts their access. Since R&D work often involves novel tasks that are inherently ambiguous and complex (Janz, Colquitt, & Noe, 1997), individuals who have a shared mental model with others can share ideas and information more efficiently and effectively (Levesque, Wilson, & Wholey, 2001). As a result of having greater shared expectations and understanding, improved coordination, communication, and better R&D performance occurred(Klimstra & Potts, 1988; Pan & Scarbrough, 1999; Rouse, Cannon-Bowers, & Salas, 1992). Hence, group members who shared the same codes and language with each other will demonstrate higher levels of R&D performance. These observations suggest the following:
H3b: The group’s level of shared codes and language is positively related to their R&D performance.
3.5. Cultural Dimension – Cooperative Culture
According to goal interdependence theory (Deutsch, 1949), cooperatively structured situations create perceptions of shared fate and promote supportive behaviour, whereby each group member looks out for the interests of the others. In addition, insights and lessons learned by one member are shared so that all can benefit vicariously from others’ experiences. Therefore, it is hypothesized that:
H4a: The group’s cooperative culture is positively related to their R&D performance.
3.6. Cultural Dimension – Competitive Culture
Typically, people placed in competitive structures tend to keep valuable information proprietary - rather than share information and experience. Moreover, rather than supporting each other, people placed in competitive reward structures may be motivated to impair the progress of others in an effort to gain positive advantage (Beersma et al., 2003). This discussion suggests the following proposition:
H4b: The group’s competitive culture is negatively related to their R&D performance.
3.7. R&D Performance – Research Assessment Exercise (RAE)
The UK higher education system has developed a range of statistics in an attempt to measure its performance. Nevertheless, the UK Research Assessment Exercise (RAE) is widely accepted as the most rigorous measure of research output available in the UK. Therefore, the data source of the academic researcher submission for the 2001 UK RAE was used as the indicators of R&D performance (dependent variable) in this study.
4. Research Methodology
The research design followed a mixed method approach. This involved a set of semi-structured interviews that informed the formulation of appropriate research hypotheses, and a questionnaire survey, that facilitated the statistical testing of these hypotheses. A total of six academic researchers from Loughborough University participated in the semi-structured interviews. During the interviews participants were asked a set of 13 questions about the effects of structural, relational, cognitive and cultural dimensions of social capital on the performance of their research groups within the university. The results of the interviews revealed that six main factors affected group performance. These were: the presence of structural dimensions (collaborative networks), relational dimensions (trust), cognitive dimensions (shared vision and shared codes and language), and cultural dimensions (cooperative and competitive culture).
4.1. Questionnaire Development
The primary aim of the pilot study questionnaire was to develop a reliable instrument for organizational social capital and the R&D performance that could be tested effectively in the main study. The principal construct of organizational social capital was developed comprising four sub-constructs: structural dimension, relational dimension, cognitive dimension and cultural dimension. An outline of the questionnaire is shown in Table 1. Each of the four sub-constructs of organizational social capital were developed using 7 items: collaboration cosmopolitan pattern, collaboration strategies, trust, shared vision, shared language, internal forces of cooperation and internal forces of competition.


Table 1 .Outline of the Questionnaire

Construct Sub-construct References Items Total
Personal Information 12 12
Structural Collaboration Cosmopolitan Pattern (Bozeman & Corley, 2004)
6 18
Collaboration Strategies (Bozeman & Corley, 2004; Melin, 2000)
12
Relational Trust (Huff & Kelley, 2003; Politis, 2003; Zaheer, McEvily, & Perrone, 1998)
10 10
Cognitive Shared Vision (Tsai & Ghoshal, 1998)
2 8
Shared Language New 6
Cultural Internal Forces of Cooperation (Jashapara, 2003; Mintzberg, 1991)
5 10
Internal Forces of Competition (Jashapara, 2003; Mintzberg, 1991)
5
Social Desirability Scale (Ballard, 1992)
13 13
2001 RAE Rating 1 1
Total 72
4.2. Sampling
The data source of the academic researcher submission for the 2001 UK Research Assessment Exercise (RAE) was used as an effective sampling frame in this study. The RAE was a UK-wide undertaking, whereby each publicly funded university and higher education college in the UK was invited to submit information about their research activity for assessment. Information provided was assessed and quality ratings were awarded for all subjects in which research was submitted. These data were collected by the Higher Education Funding Council for England (HEFCE) on behalf of the four UK funding bodies. The information largely relates to a five-year period, running from the last RAE in 1996. The data can be searched on-line or sections downloaded from http://www.hero.ac.uk/rae/index.htm. The theoretical sample size for this study were determined from the formula given by Tull and Hawkins (1993) for a stratified sample:

Given these parameters, the estimated stratified sample size for this study is:


The stratified random sample using the 2001 RAE submission data for the pilot and main study was determined as shown in Table 2.
Table 2. Stratified Sample of Pilot and Main Study

RAE Rating No. of RAE 2001 Submission Pilot Study Sample Main Study Sample
5* 11767 58 582
5 21850 108 1080
4 14879 74 736
3a 7528 37 372
3b 3174 16 157
2 1368 7 68
1 119 1 6
Total 60685 300 3000
4.3. Main Survey
The data for the pilot and main study were collected using an online questionnaire. The main reason for choosing the online method of data collection is it offers some advantages over the traditional postal approach from an efficiency and cost effectiveness viewpoint. One of the major assumptions for the data collection process is that most of the academic researchers in the UK have access to the Internet in order to participate in this research. The development of the online questionnaire was done using the HTML editor and the layout was design to be as simple as possible to avoid any technical complications to access the questionnaire. The questionnaire for this research can be access at http://www-staff.lboro.ac.uk/~lsmii/start.htm.
The data collected from the online questionnaire survey were used to test the hypotheses. The questionnaire included items related to the six main factors affecting group performance. Each item was measured through a 7-point scale, which 1 represents Strongly Disagree and 7 represents Strongly Agree. The questionnaire was piloted and then distributed to a sample population of 3000 academic researchers from various UK HE institutions. A total of 311 (response rate = 10.37%) researchers provided input to the questionnaire. To ensure that the research instrument measured the right elements consistently, each construct was also tested for reliability and validity. The reliability of the construct was confirmed by computing the value of Cronbach’s alpha. Table 3 shows the results of the reliability and validity analysis for each of the constructs. The results demonstrated that the measurement of the research constructs were reliable (the value of Cronbach’s alpha ranging from 0.72 to 0.94) and hence, suitable for further validation testing. The evidence of construct validity, which consists of convergent, discriminant and nomological validity, were provided using different correlational analyses and multi-method matrix. Factor analysis was also used to test the construct validity of each dimension. All the constructs pass the convergent validity test, but the collaboration strategies construct failed the discriminant and nomological test. With this failure in mind, the collaboration strategies construct was excluded from further hypotheses testing and does not appear in the following section.
Table 3 Reliability and Validity Test Results

Dimensions Constructs Reliability Validity
Alpha Cronbach Convergent Discriminant Nomological
Structural Collaboration Strategies 0.72  Fail Fail
Relational Trust 0.94   
Cognitive Shared Vision 0.89   
Shared Language 0.79   
Cultural Cooperative Culture 0.85   
Competitive Culture 0.80   
5. Results
This section presents the analysis on the relationships between the constructs. It tries to achieve the objective of the research: 1) To test the research hypothesis and 2) To evaluate the proposed model of social capital and R&D performance.
The hypotheses proposed were based on the relationship between the independent variables and the dependent variable as identified and discussed earlier. The hypotheses are evaluated by doing an analysis of correlation coefficients between each of the independent variables and the dependent variables. The results of the correlation between each of the independent variables represented by Trust, Shared Vision, Shared Codes and Language, Cooperative Culture and Competitive Culture and the dependent variables represented by the outcome of the 2001 RAE (RAE) of the test are shown in Table 4.
Table 4 Correlation Matrix of the Research Model

Correlation Coefficients
RAE Trust Shared Vision Shared Language Cooperative Culture Competitive Culture
RAE 1
Trust .776** 1
Shared Vision .590** .666** 1
Shared Language .505** .586** .584** 1
Cooperative Culture .680** .728** .696** .599** 1
Competitive Culture -.405** -.493** -.521** -.495** -.495** 1
** - Signif. LE .01

The associations between constructs were investigated by examining the correlation coefficients between the constructs. The analysis supported all the hypotheses proposed in the study. The results showed that five out of the six dimensions of social capital had an effect on the performance of research groups. These were trust (H2), shared vision (H3a), shared codes and language (H3b), cooperative culture (H4a), and competitive culture (H4b).
The second research objectives, which tries to evaluate the proposed model of social capital and R&D performance in Section 3 was tested using the multiple regression analysis technique. This analysis shows how well a set of variables (the different dimension of social capital) is able to predict a particular outcome (R&D performance). The results of regressing the five independent variables against R&D performance (RAE) can be seen in Table 5. The indicator that is important here is the value of R Square. It indicates how much of the variance in the dependent variable is explained by the model (Pallant, 2005). Table 5 shows that the value of R square is 0.632, indicates that the model (Trust, Shared Vision, Shared Codes and Language, Internal Forces of Cooperation and Internal Forces of Competition) explains 63.2 per cent of the variance in R&D performance.
Table 5 Research Model Summaries
Model R R Square Adjusted R Square Std. Error of the Estimate
.795 .632 .625 .906

The next step is to investigate which of the variables from the model contributes more to the prediction of the dependent variable (R&D performance – RAE). The results in Table 6 show that the highest beta coefficient is 0.585 (p<.0005), which is for Trust. This means that this variable makes the strongest unique contribution to explaining the R&D performance (RAE), when the variance explained by all other variables in the model is controlled for. The beta value for Internal Forces of Cooperation was slightly lower (.224) (p<.0005), indicating that it may also contribute to the prediction of the R&D performance but at a lower level.
Table 6 Coefficients for the Variables
Model Unstandardised Coefficients Standardised Coefficients
B Std. Error Beta
Constant .125 .440
Trust .071 .007 .585
Cooperative Culture .052 .014 .224
Shared Vision .013 .013 .053
Competitive Culture .007 .011 .028
Shared Language .004 .021 .011
6. Conclusions
In conclusion, this study provides important empirical evidence on the relationship between social capital and R&D performance in higher education in the UK. Furthermore, the study reveals the variables that have a significant positive relationship with the performance of R&D are trust, shared vision, shared codes and language and internal forces of cooperation. The internal forces of competition however, have a significant but negative influence on the R&D performance.
The study also produced a model that considered the different dimensions of social capital and how these dimensions might have an impact on the performance of R&D in the HEI in the UK. The result from the regression analysis shows that trust, an element of relational dimension of social capital, has the strongest influence towards explaining the R&D performance. The study also reveals that the proposed social capital model, which consists of relational dimension (Trust), cognitive dimension (Shared Vision and Shared Codes and Language) and the Internal Forces of Cooperation and Competition explains 63.2 per cent of the variance in R&D performance.
The study makes a substantial methodological contribution for investigating social capital by offering a validated tool for measuring key constructs related to social capital in organisations. Most of the constructs have demonstrated a high level of reliability and validity in their development. Therefore, the methodological implications of this research are twofold. Firstly, by carefully defining the constructs of the different dimensions of social capital, it helps the researcher to design the instrument in a systematic way and therefore helps to develop more valid and grounded indicators. Secondly, since most of the constructs to measure the social capital were carefully selected and adopted from the previous studies, it helps the researcher to compare and evaluate its suitability and reliability to this research. The results show that all of the constructs adopted are well suited to the HE environment and this provides the evidence of construct reliability across different sector.
The findings also give rise to a range of recommendations to enhance the performance of R&D within research groups. These include provision of social space for discussion and informal communication, nurturing of a culture conducive of trust and cooperation, knowledge sharing, shared vision and shared codes and language. At the strategic level, consideration should be given to developing and implementing initiatives, based upon the findings reported in this report, that can be carried out by the university to improve research group performance. Ways of countering the negative effects of a competitive culture that might weaken R&D performance within research groups should also be explored.
Acknowledgments
This research was funded by the Ministry of Science, Technology and Innovation (MOSTI), Malaysia and Universiti Teknologi Malaysia.
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TEN TRENDS AND TURNING POINTS

TEN TRENDS AND TURNING POINTS OF THE KNOWLEDGE ECONOMY: A CONCEPTUAL FRAMEWORK
YEONG-LONG CHEN
Office of Research and Development, National Taiwan University of Science and Technology
IB9F, No.43 Sec.4, Keelung Rd., Taipei, 106, Taiwan
E-mail: chen@office.com.tw
GUAN-YI LI
Graduate Institution of Finance, National Taiwan University of Science and Technology
IB10F, No.43 Sec.4, Keelung Rd., Taipei, 106, Taiwan
E-mail: ssscansss1022@gmail.com
Knowledge in the era of knowledge economy means not only professional, education, skills or patent development, but also innovative, dynamic changes for the development of new tools, new processes, new resources, new ideas and new actions. As technical developments affect individuals, households, and businesses more directly and more deeply, factors such as how to handle the falling of borders among organizations and nations, how to extend the confines of business cooperation, how to enter the areas of cross-field interaction and innovation, how to listen attentively to customers’ requirements, how to let customers be more involved in research and development (R&D), how to build multiple directions and prompt communication channels, how to integrate virtual and real resources, how to develop the power of team intelligence, how to work together on projects, how to quickly create a web of public relationships, and how to facilitate knowledge sharing, are all necessary for businesses to conquer the shrinking profit margin issue. We propose a conceptual framework for addressing the ten trends of knowledge economy development, including globalization, collaboration, intersectional innovation, customerization, diversified communication, virtualization, individualization, outsourcing, social-networking, and knowledge-sharing. Each trend is an additional turning point for a business. For example, globalization is a ways to deal with costly materials, collaboration can be helpful for business on too small a scale, intersectional innovation helps deal with the non-direction of a business organization, customerization helps deal with overstock problems, diversified communication can remedy time consuming work, virtualization can help deal with insufficient resources in an organization, individualization can help deal with the problem of an unknown brand, outsourcing can help deal with an insufficient labor force, social-networking can help deal with the lack of personal networks, knowledge-sharing can help deal with the lack of a knowledge base. If a business can design an ideal solution scheme for each turning point, it may overcome the current problem with shrinking profit margin, so as to promote the development of the business into a knowledge industry, and further help in the transformation, upgrading and growth of that business.
1. Background and motives
The opening up of the world of internet information and global resources, transparency of expert net and intellectual properties, appearance of tools for rapid mobile communication and the disappearing of organizational boundaries and national borders, all bring new ways of thinking and a turning point to businesses. Facing the coming era of the knowledge economy, small and medium enterprises are experiencing an M-shaped trend in their financial margins, but the same working hours (Ohmae, 2006). Those businesses who can find new tools, new processes and new resources, so as to encourage new thinking and adopt new approaches, can not only promote the benefit of efficiency, but find the directions of upgrade and transformation. Whereas other businesses may suffer from increasingly long working hours and tiny profit margins due to the use of costly raw materials, lack of labor force and resources, poor sales, and so on. The purpose of this paper is to present a conceptual framework for addressing the ten trends of the knowledge economy, including globalization, collaboration, intersectional innovation, customerization, diversified communication, virtualization, individualization, outsourcing, social-networking, knowledge-sharing, etc. In addition for an introduction of the causes and key features of the ten trends, we also outline ten principles for helping enterprises get through the bottleneck of a tiny margin. Hopefully this can lead small and medium enterprises to welcome the coming of the knowledge economy, to open up the freeer running into the knowledge industry.
2. The evolution of the knowledge economy
The Organization for Economic Cooperation and Development (OECD) issued a report on the knowledge economy in 1996 where they contended that the economy based on knowledge will change the patterns of global economic development. Knowledge has become the main force promoting productivity and economic growth. Following the quick development and heavy application of information communication technology, the increase of output, employment and investment will obviously require turning to the knowledge-intensive industries (OECD, 1996).
Chesbrough (2003) proposed the concept of open-innovation in his book Open Innovation, contending that not all wise employees work for companies, that more and more useful knowledge is spreading among various sized companies and global territories. The difference between closed and open innovations is that the former focus on the internal aspects of research and development, production, and control processes, while the latter one focus on the external performance of research and development, thereby creating far more value, building up the best solution to cross internal and external thought.
In 2003, Web 2.0 (O’Reilly, 2003) was discussed where the wisdom of the multitudes was postulated to rise sharply, allowing the formation of community sites through social networking. Commercial cyber platforms allowed the displaying of non-hot commodities infeasible to display in traditional shops and thus the finding of more business opportunities. In his work The Long Tail, Chris Anderson (2006) destroyed the conventional 80/20 rule. In this way wisdom of crowds could be integrated and linked on web platforms in less that no time, thus forming the mechanism of group-decision-making by the non-expert. Its achievement was even better than by expert intelligences.
In the OECD issued 2004 report, Innovation in The Knowledge Economy, they proposed the concept of the innovation tank with four pumps (OECD, 2004). If the assumed innovation was a car, the four pumps to drive the car to move were: (i) science-based innovation. Science plays an unquestionable role in advancing knowledge. However although it can produce rapid progress in knowledge, its findings are often generalized and applied only slowly. (ii) Collaboration among users and/or doers. New actors are becoming engaged in innovation processes, developing collaborative modes of knowledge generation, and this creates new opportunities. (iii) Modular structures, each with freedom to innovate, yet joined together in a whole innovative system. This evolved the character of innovation into complex technological systems thus creating new needs for co-ordination and certification. (iv) Finally, the effective harnessing of information and communication technologies, as an instrument of innovation, can be a powerful trigger for transforming activities.
In 2006, IBM issued the Expanding the Innovation Horizons: The Global CEO Study, in which they detailed in depth interviews with 765 CEOs worldwide, inquiring relative issues of innovation (IBM, 2006). Their results showed that those CEOs thought the sources of innovation idea came from the following: internal employees, external business partners, external customers, consultants, competitors, and so on, in that order. In contrast, internal sales and service sections and research teams were ranking behind. Such results also correspond to the viewpoint of Chesbrough (2003) as discussed in the book Open Business Models.
Knowledge highlighted in the era of the knowledge-economy means not only professional, education, skills or patents, but also innovative, dynamic changes in new tools, new processes, new resources, new ideas and new actions. As technical developments affect individuals, households and businesses more directly and more deeply, those factors such as how to handle the features of the falling of borders among organizations and nations, to extend the confines of business cooperation, enter into cross-field interaction and innovation, listen attentively to customers’ requirements, let customers be more involved in research and development (R&D), build up multiple directions and prompt communication channels, integrate virtual and real resources, develop the power of team intelligence, wisely use the approach of working together on increasingly small projects, quickly building the net of public relationships, and facilitating the power of knowledge sharing, are the new turning points and keys for businesses to conquer the issue of shrinking profit margins.
3. A conceptual framework of the ten trends of the knowledge economy
For the development of a new economy, a knowledge economy, the now economy (Economist, 2002), we combine open innovation and Web 2.0. We attempt to propose a conceptual framework (Figure 1) for addressing the ten trends for developing the knowledge economy, including globalization, collaboration, intersectional innovation, customerization, diversified communication, virtualization, individualization, outsourcing, social-networking, knowledge-sharing. We also illustrate the practical applications by real cases under current trends. Hopefully, this can help small and medium enterprises to find new turning points and ways to break through the bottleneck of the tiny profit margin.


Figure 1 Conceptual framework of the ten trends of the knowledge economy
3.1. Globalization
A columnist of the New York Times and winner of the Pritzker Prize, Friedman (2005) suggested in his book The World is Flat that globalization has entered into its third generation. In Globalization 1.0, the driving force came from nations; in Globalization 2.0, it came from enterprises; nowadays, in Globalization 3.0, it comes from individuals. He also points the borders between nations and organizations are being fading. The world has been flatted by the ten bulldozers of digitalization, e-trends, virtualization, outsourcing, supply chains, open software. In the era of globalization, everyone should welcome the trends instead of resisting them by building higher walls.
The Japanese master for strategic management Prof. Ohmae, discussed an example in his book, Lower-Middle No Shougeki (Ohmae, 2006). The problem was that the price of rice price was four times higher in Japan than in the U.S.A. or Singapore, and three times higher than in Australia. In addition, the price of beef price was five times higher in Japan than in Australia, and 4.5 times higher than in Singapore or the U.S.A. Prof. Ohmae discovered one thing after visiting Australia, that the Australian agricultural manager was doing all the work, equal to the work done by a whole family in Japan, alone. One such farm could produce 1% of the total rice output of Japan. Furthermore, when studying production procedure, it was discovered that the manager hired odd-job workers for about 3 days for seeding. To take care of the farm more efficiently, he sloped the land at regular one hundred meter intervals to facilitate the running of water around the whole farm. Temporary workers again be hired during the harvesting season. Therefore, the Japanese farm could provide sufficient rice for all demands from only buying one hundred lots of such kind of rice farm. Even when the transportation cost was added in, Japanese consumers were still able to buy the rice for 1/10 of the current price.
In the face of economic globalization and locality integration, the borders between enterprises and nations are fading. In particular, through the links of the internet, the virtual cyber world crosses the barriers of time, space and distance. This becomes a totally new, abundant resource system, where even the information transparency brought about by the cyber world encourages a more open business pattern. It is crucial for businesses to deal with the increasing prices of raw materials, so as to control costs and integrate resources, to promote competiveness by using global resources more intensively, and to undertake the arrangement worldwide under the strict impact of globalization.
3.2. Collaboration
According to Wikipedia, collaboration means when “two or more people or organizations work together in an intersection of common goals” (Wikipedia, 2006). Collaboration is an innovation that does not necessarily require leadership, and may even bring better result by releasing power and equalitarianism. The book, Collaborative Advantage, clearly proposes the concepts of collaboration and extended enterprise simultaneously (Dyer, 2004). It contends that the extended enterprises represent a group of enterprises in the value chain, who cooperate to form an integrated team by means of collaboration procedures, to achieve a virtual combination. The virtual integration mentioned in the book means that the business partnership is just like the employee relationship in an internal enterprise.
Toyota Motors has won the honor of being the most admired knowledge enterprise (MAKE) five times since the construction of their plant in North America in 1986. This is due to their global arrangement, incorporating the core capabilities of prompt production skills, operation of satellite plants to new plants in new nations or branches, taking advantage of local success experiences, to occupy the new market. This enhances information exchange among their suppliers, sharing all relative knowledge regarding promotion of skills and production procedure. At the same time, to avoid the appearance of the free rider who does not contribute to the production team due to selfishness, or ignorance of internally valuable knowledge, Toyota Motors has established a worldwide knowledge sharing network. Their knowledge sharing system enhances self growth and learning of internal supplier units. This helps them to face various production issues together. Toyota Motors allows partner suppliers to build up multiple channels of communication. They also offer intensive paths of communication between suppliers and master plants. After knowledge management was added into the framework, Toyota Motors transformed their previously inefficient net sharing to the currently more mature and efficient net sharing (Dyer and Nobeoka, 2000).
In the situation of limited resources faced by small and medium enterprises, who should concentrate such resources in the creation of core value, and simultaneously share the enterprise value in the net, can generate the overall value of “1+1>2”. This is done by mutual knowledge sharing and collaboration among various cultures, fields and experts.
3.3. Intersectional innovation
Johansson (2004) pointed out in The Medici Effect, that the intersection of different fields, subjects and cultures, and the combination of existing concepts, can generate abundant, new, breakthrough ideas. This intersectional innovation is called the Medici Effect. The three motives for such innovations are: (i) the movement of people; (ii) the convergence between scientific disciplines; (iii) the leap in computational power.
The innovative plan of IBM in 2007 allowed tens of thousands of IBM employees, customers, partners, even their family, in 160 countries worldwide, to participate in a new proposal, a web site, “Innovation Jam”. The plan was not only a brain-storming plan, but also allowed participants from different cultures, to exchange work and life experiences. The purpose were not only to provide the creation of new ideas, but more importantly to discover new market opportunities, offering really helpful solutions leading to improvements in commerce and society. IBM also committed itself to realize the best selected creations to the tune of USD 100,000,000 (IBM, 2008).
In recent years, the Harvard Case Study has become common in local colleges. It was based on group discussions to propose solutions from different fields. The instructors play the solely role of make the introduction and giving suggestions. The inspirations generated from the discussions are normally the most innovative and doable solutions. Therefore, when the small and medium enterprises are faced with difficulties like competition from big enterprises and lack of funds for R&D, they should integrate their cross-field talents and resources, to perhaps create another “Harvard Enterprise”.
3.4. Customerization
Since conventional enterprises normally consider “production orientation”, they usually start from the core abilities they have. They then use the uniform production procedure to take advantage of convenient and steady channels to provide their products and services to customers. Nowadays with transparent information and rapid changes, the changes of likes and dislikes for products and marketing channels are becoming are occurring more quickly, and the possibility of unsalable goods getting bigger. Enterprises must adopt customization to correspond to the needs of the digitalization era. To tailor marketing channels to suir customer needs it is necessary to know the demand, to use flexible production procedures which can respond to current market trends, and use their core capabilities to provide customers with the products and services in demand. If an enterprise is limited to only internal core capabilities and resources, they might utilize outsourcing into account, job-sharing and integration to make up the lack (Small and Grice, 2001).
The development of internet technology had made communication between enterprise and customer more prompt and diverse, and hence, the tailor-made trend has been upgraded to customerization. That is, the enterprise should start not only by looking at the customer demands, but further allowing customers to participate in designing, R&D and group-decision-making. Google for example tests a beta version of a new product in the Google Lab. It welcomes the criticism and testing from hundreds of thousands of net friends worldwide before launching the new product. This strategy enlarges the number of national backgrounds of the testers. More importantly all these testers may be potential customers of Google in the future. Hence, listening to customers’ needs and criticisms and adjusting products accordingly are the chief contributors to success of Google Lab (Google, 2008).
Overthrowing the conventional mindset about producer orientation, customerization may not only bring about new commercial patterns for enterprises, but also save input costs for R&D, design, marketing, and inventory. Hence, through the participation of customers in the inspiration and design of self-need products, enterprises can get to know the real requirements of their customers. This helps them to make adjustments to promote the client loyalties, which helps to solve the bottlenecks of overstocking and resource waste due to mass productions.
3.5. Diversified communication
Entering the “now economy” (Economist, 2002), communication channels are becoming more diversified. In addition to the traditional face-to-face encounters, letters, phone calls and faxes, the paths of electronic and internet services like e-mail, msn, skype, 24hr on-line service webs, blog, Web 2.0 and so on, all speed up enterprise communications. Entering the mobile era, we have 3.5G smart cell phones, personal digital assistants, wireless notebooks, along with the integration of WiMAX and the Ubiquitous trend. All of these generate a continuous communication environment in the form of people versus people, people versus machines, machines versus machines.
The problems of unsymmetrical information with paper communication mean that too much time is spent due to differences in perception, concepts, operating processes, between common enterprises and customers, which can even affect good mutual relationships. However, in the knowledge economy, more and more new resources and tools are being developed that make it easier for small and medium-sized enterprises to adjust business patterns and transform time-consuming costs into constant growth. This is done by properly using the technology of digitalization, the net, virtualization, mobilization, and so on, in response to environmental changes.
3.6. Virtualization
In recent years, the virtualization of organizations and man-power has become an irresistible trend. Virtual teams have gradually appeared. The so-called virtual team is a work team combined to meet the common goals or benefits, which communicates across time and space. Coordination, discussions, document exchange, etc, are carried out by means of conventional phone, fax, and face to face meetings, or more advanced communication tools such as instant messaging, cell phones, computer, internet, video, electric whiteboard, discussion forums, and so on, to complete a pre-determined project or mission by ways of job-sharing. According to the book Virtual Teams, the four patterns of virtual teams are: purpose, people, links and time (Lipnack and Stamps, 1997). One well kown American web site, www.virtualteamworks.com, has assessed a virtual team after two to three months of cooperation. They have discovered that the overall efficiency of the virtual team is twice that of a conventional work team who cannot perform long-distance communication, in terms of trust, communication, cooperation, trouble shooting, decision making and executing capability.
For constant growth, enterprises must invest funds in software, hardware and training. However, most enterprises cannot absorb those new costs for office, manpower, and long-term equipment due to the limits of their financial resources. New costs must be transferred to product prices, a burden ultimately borne by the customer. Hence, whether learning to use limited physical resources combined with unlimited virtual resources, through digital organization establishing virtual mobile offices and work teams, allocating enterprise resources, simultaneously strengthening the considerable competiveness of the markets, will be the key factors for the continuous growth of enterprises.
3.7. Individualization
A columnist of New Yorker magazine, Surowiecki has told many stories regarding “Crowd wisdoms are superior to experts” in the book, The Wisdom of Crowds (Surowiecki, 2004), similar to an old Chinese saying “The wisdom of the masses exceeds that of the wisest individual”. For example, in the US there is a TV show: “Who wants to be the millionaire” where there are some two emergent solutions (i) The player calls out to ask his most smart friend, relative, teacher or expert. (ii) To allow the audience to call in to offer solutions, then, do a statistic survey on the two solutions in terms of true ratio, as a result, the calling out ratio is 65% whereas the calling in is 91%.
This is the era in which the tiny individual power cannot be ignored. An uninfluential group of people can answer questions based on common sense, integration, and cooperation more wisely than the most intelligent individual can do. This also explains why in Korea and Japan, people are encouraged to report on small events or news items by themselves every day, just as a reporter would do (www.Ohmynews.com). No only this, dull-sale commodities which would never be displayed in main-stream shops or shopping males may even break the 80/20 rule (long tailed effect) due to the non-physical-space limit in on-line shops (Anderson, 2006). Many US internet companies have discovered that the sales volumes of non-stream or dull-sale CD, DVD, or books in physical shops, make up 20%040% of the overall sales volume.
3.8. Outsourcing
Enterprises can not only outsource non-core jobs to external entities, but also core jobs after proper categorizing. These outsourced jobs can be returned to the company for collection and integration. Thus, the most professional experts may do the most professional jobs. The cooperative entities for outsourcing are normally non-core or expertise-complimentary companies, or professional studios or individuals, who complete the mission in compliance with a preset agreement. They can perform their jobs inside the offices or at designated locations.
Outsourcing due to considerations of cost saving and resource integration may not only speed up project progress, but also promote job quality. In the era of transparent information, it becomes easier to access professional enterprises or experts in different fields. In the past, differences in profession made people feel worlds apart, but nowadays, even those in same profession feel worlds apart. In today’s conditions, job sharing is becoming increasingly rare. Learning to link up outsourcing capabilities to overcome the barriers of insufficient talents, without doing jobs independently, will become the new challenge for future organizations.

3.9. Social-networking
With the concept of Web 2.0 comes the establishment of social-networking, a fast and simple platform for collaborative publishing, development of two-way communication tools, taxonomy of readers, all highlighting online collaboration and information sharing among users. Web 2.0 is a new situation following the net evolution, which arises due to continued development of technology offering speedy access, prompt interaction and diversified service. This is an active evolution after the volume of net applications has reached a critical point. Really simple syndication (RSS) is an automatic mechanism on the Web 2.0 platform for easy collection and transmission of web information and news. Asynchronous JavaScript and XML (AJAX) can perform non-synchronous requests without having to wait for feedback from servers, thus speeding renewal at the web users’ ends. Tag is a flexible and interesting approach to journal sorting, allowing users to add one or more tags in each journal, thereby creating more links and communication with other users. Finally there is the blog, an abbreviation of weblog, which can be used as a diary recording daily life or work. (Wikipedia, 2008)
Web 2.0 speeds up the development of the web and social-networking offering the facilities for community web sites. Small and medium enterprises commonly face the problems of hard sales and few orders, as a result of the lack of personal networks. At present, the new tech innovations facilitate collaboration and information sharing among users. In the era of Web 2.0, the power of the net public is considerable. Learning how to apply technology to build up networks as a substitute for traditional personal relationships (single versus multiple) is one way to facilitate the advantages of relative marketing, and will be a big issue for enterprises.
3.10. Knowledge-sharing
Ikujiro Nonaka proposed the concept of “ba” (a Japanese concept meaning “place”). Knowledge is embedded in “ba”, where it is then acquired through one’s own experience or reflections on the experiences of others (Nonaka and Konno, 1998). The spiral of knowledge (Nonaka and Takeuchi, 1995) is an influential concept in the knowledge management field. This perspective illustrates four processes for creating knowledge value through interactions between tacit to tacit, tacit to explicit, explicit to explicit, and explicit to tacit knowledge. The four interaction processes are: socialization, externalization, combination and internalization. The main instruction is that as more and more employees of enterprises are involved in the interaction of tacit and explicit knowledge, the speed and scale of knowledge transformation will become faster and bigger, to further transform individual knowledge into organizational knowledge, even to the cross-organizational level. The sudden appearance of MIT (2008) OpenCourseWare, which can be translated into multiple languages in few years. Wikipedia possesses 7 times as much data volume and 100 times the browsing rate of the British Encyclopedia, and is the result of the sharing of knowledge workers and global peer-review.
The innovation of future enterprises and creation of organizational intellectual capital should be done through data collecting and sorting, thereby forming meaningful information, and transforming this into knowledge useful to the enterprise by integrating the information with personal experience, truth, judgment, intuition, and value. Small and medium enterprises can take advantage of the expansion of knowledge sharing. The inexhaustible features of knowledge information can reproduce knowledge, driving knowledge management, to establish the culture of knowledge sharing allowing every employee to become proposal raisers, though under the situation of limited manpower. That is, the creation of knowledge or intellectual capital starts from knowledge sharing among organization employees. The enterprise will never need to worry about having no “think-tank”.
4. The ten turning points to break through the tiny profit margin
Ten trends represent ten turning points as well as ten windows of opportunity. For small and medium enterprises to break through the current bottleneck of tiny profit margins, they must aggressively seize the new changes presented by the trends of the knowledge economy. Here we discuss factors in terms of trends, features, chances and bottlenecks; see table 1.
(i) With the coming of the era of globalization, borders between organizations and nations are becoming fuzzy. Transparent information and easier electronic-purchasing will afford enterprises more chances to find cheaper raw materials.
(ii) In the era of collaboration, enterprises will expand the confines of cooperation to integrate partnerships, suppliers and customers as part of the enterprise, without any barriers to employee numbers, space, or scale.
(iii) Breaking stereotypes regarding persons, matter, materials, to undertake cross-field thinking and innovation will allow enterprises to find new directions for transformation.
(iv) The era of customer orientation is not merely listening to customers, but also customerization, that is allowing customers to participate in the design, R&D, and decision making processes, so as to decrease unnecessary production and inventory.
(v) The real-time technology of digitalization, net, virtualization, and mobilization allow multiple-ways for immediate communication with partners and customers, so as to minimize time and cost.
(vi) The traditional concepts of enterprise resources for production, marketing, manpower, development and finance, must be broken up in no time. The resource matrix of an enterprise includes real objects, and virtual, internal and external resources. The capability of resource integration will determine the competiveness of an enterprise.
(vii) In the era of individualization, the wisdom of the masses is rising sharply. The approach of properly adopting group-decision-making, and breaking-up the myth of solely selling hot goods and brands should be aggressively considered.
(viii) Learning how to outsource and control quality could override the barrier of insufficient manpower.
(ix) Web 2.0 brings fast new social-networking. It is also a new turning point for enterprises to apply technology to build a personal networking map, and to facilitate relative marketing.
(x) The knowledge economy means the era of opening and sharing, so that enterprises will never worry about having no “think tank”. They can start the knowledge management, build up the culture of knowledge sharing and allow all employees to be both proposers and participants.

Table 1. Ten trends and ten breakthroughs of the knowledge economy
Trends Critical features and turning points Bottleneck breakthrough
Globalization Borderless organization or nation Costly materials
Collaboration Extension of cooperational confines Low scale
Intersectional innovation Intersectional innovation between-fields No directions
Customerization Start from customer demands, customer participation Excess inventory
Diversified communication Real-time, multiple-way communication Time consuming
Virtualization Integration of virtual and real resources Insufficient resources
Individualization Appearance of crowd wisdom No brands
Outsourcing Tiny devision of labor Insufficient labor force
Social-networking Fast establishment of relation-networks No personal networks
Knowledge-sharing Power of knowledge sharing No think-tank

The features and turning points are obviously visible behind the ten trends of the knowledge economy mentioned above. There is at least one solution hidden behind each turning point which can assist small and medium enterprises to smoothly enter into the knowledge economy and knowledge industry. These should be helpful to the transformation and upgrading of enterprises.
5. Summary
Combining the development of the new economy, knowledge economy, now economy, open innovation and Web 2.0, we propose a conceptual framework including ten trends of the knowledge economy. We discover that in the course of future development of knowledge industries, small and medium enterprises will face new challenges and trends such as globalization, collaboration, intersectional innovation, customerization, diversified communication, virtualization, individualization, outsourcing, social-networking, knowledge-sharing and so on. These ten trends also represent ten turning points or ten windows of opportunity. Small and medium enterprises should aggressively make changes to follow those trends.
Employees should not be evaluated solely on the basis of working hours. A brain storming worker could also be a very efficient one but with quite short working hours. In future schools, students should not be evaluated solely by grades. A thoughtful student may be an inspirational one but with low grades. In future R&D, researchers should not be evaluated solely by the numbers of patents. An innovative researcher might have many new ideas for changing human life and contributing to social development but with few patents. Nowadays the era requires flexibility, sharing and collaboration, even opening and linking. Enterprises and individuals should both throw away traditional burdens, change outdated habits, leap behind conventional minds, examine and modify the existing system at all times, in order to welcome the coming era of new tools, new processes, new resources, new minds, and new actions.
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CHALLENGES OF KNOWLEDGE MANAGEMENT

CHALLENGES OF KNOWLEDGE MANAGEMENT AND COLLABORATION BETWEEN GOVERNMENT AND SMES: THE CASE OF TOURISM PROMOTION IN TAIWAN

YAU-TZU MA
Graduate School of Business, Argosy University
Argosy University/S.F. 1005 Atlantic Ave, Alameda, CA 94501, United States
dennisma888@yahoo.com

ANDREA CRESTAN
Graduate School of Business, Argosy University
Argosy University/S.F. 1005 Atlantic Ave, Alameda, CA 94501, United States
acrestan@argosy.edu

Knowledge Management (KM) has different implications for different businesses in different contexts. In recent years, management researchers have proposed theoretical frameworks for KM in primary industries (Pan, & Scarbrough, 1999). These IT-based theoretical frameworks include models from Wiig, Leonard-Barton, Arthur Anderson and APQC, and Choo (Selamat, Abdullah, and Paul, 2006). However, the tourism industry has failed to embrace KM, academic research seldom influencing the real life issues and practices in tourism (Cooper, 2006). This article focuses on the tourism industry whose core product is knowledge itself. Using the case of Taiwan, this research examines how KM affects the competitive nature of the country’s industry and how travel business associates can use KM to build long-term competitive advantages. Hall (2005) suggests that knowledge management consists of both information technology (IT) and non-IT tools and techniques to assist in the creation, sharing, and storage of knowledge efficiently. Although technology can support KM, it still comes back to the people to build those technologies, use, and constantly improve them. Therefore, the goal of this paper is neither the replication nor the testing of technology based KM. This paper discusses a non-technological approach of KM in regards to how the Taiwanese government may collaborate collectively, and convert “tacit knowledge” into "explicit knowledge" or information for small and medium sized enterprises (SMEs), utilizing wider KM applications to accomplish desired goals and objectives for the country’s tourism industry.
1. Introduction
Traditional knowledge management (KM) focuses on the single organization. The KM and tourism industry in broader scope are the collaboration between both public and private sector organizations to promote destinations collectively (Ruhanen and Copper, 2004). In today’s highly competitive global business environment, it is generally accepted that the sustainability of a firm’s competitive advantage will depend on its innovative capacity based on knowledge acquisition, integration, and application (Chen, 2007). For SMEs, the application of KM for innovation and product development is critical for the competitiveness of both tourism destinations and enterprises (Hjalager 2002). Today, KM has been recognized as a key competitive tool for the private sector and a determinant of economic growth for governments (Lin, 2006).
Tourism, as one of the world’s major economic sectors, needs to adapt to this trend. The adoption of a KM approach is required to transform tourism research and intellectual property into one of the necessary competences for the sector (Ruhanen and Copper, 2004). This paper addresses the case of Taiwan and how its government can collaborate collectively, converting “tacit knowledge” into "explicit knowledge" or information for SMEs through the use of wider KM applications, accomplishing desired goals and objectives within the country’s tourism industry.

1.1. Taiwanese Governments KM Initiatives
Taiwan’s government KM initiatives are driven by the country’s Research, Development, and Evaluation Commission (RDEC); its goal is to promote government reform and innovation. This Commission is responsible for policy research, government restructuring, e-government planning, departmental performance evaluation, and government publications and archives. Under the Taiwanese Cabinet, the RDEC is charged with overseeing administrative efficiency and modernization at all levels of the government (Lin, 2007). Figure 1 illustrates the mechanism of E-government.


Figure 1. E-government mechanism.
Source: the Research, Development, and Evaluation Commission (RDEC), Taiwan.
For instance, the Cabinet implemented the e-Taiwan project (2002-2007), which is composed of e-government, e-industry, e-society, and e-infrastructure. Among the projects, e-government is a major driving force to accelerate the transformation of traditional industries to knowledge based economies (Lin, 2002).
Moreover, during the 2003 Asia-Pacific Economic Cooperation (APEC) meeting in Bangkok, Thailand, Taiwan held the first APEC Incubator Forum, offering opportunities for 100 SMEs from the region to share experiences and learn about the methods for facilitating their growth (Chung, 2004). Taiwan also proposed t the initiative "Transforming the Digital Divide into a Digital Opportunity" as the member of one of 21 member economies: Australia, Brunei Darussalam, Canada, Chile, China, Hong Kong, Indonesia, Japan, Korea, Malaysia, Mexico, New Zealand, Papua-New Guinea, Peru, the Philippines, Russia, Singapore, Chinese Taipei (Taiwan), Thailand, the United States, and Vietnam. At this meeting, participants expressed their collective concern that the "digital divide could further widen social and economic disparities across the APEC region," and they called for "a public-private partnership to create digital opportunity." The proposal aims at bridging the digital divide by helping developing member economies to improve their knowledge and skills base. The objective is to assist members and their public and private sector organizations in understanding, developing, and implementing measures to digitalize supply-chain management and enterprise-resource planning (Hwang, 2003).
2. KM and the Tourism Industry
KM for tourism research may encompass: 1) Customer-focused knowledge, 2) Intellectual asset management and 3) Innovation and knowledge creation (Ruhanen & Cooper, 2004). As shown in Figure 2, Shariq (1997) indicates four key stages of KM from knowledge generation to commercialization and diffusion.

Figure 2. The Knowledge Value Change.
A review of literature shows that there is a lack of a unified theoretical framework for SMEs in the internationalization process, market entry modes, and timing strategies for SMEs (Malhotra, Ulgado, & Agarwal, 2003). Consequently, KM plays a crucial role for Taiwan’s SMEs to compete in the international tourism market. In the visitor economy, market failures occur when both, consumers and tourism markers, encounter information gaps and potential visitors do not have the relevant information for an appropriate decisions making (Deloitte, 2008). From the business perspective, KM is important as it comprises knowledge, either embodied in individuals, or embedded in organizational processes or practices. In other words, it is most critical for firms to know what the best offerings for tourists are so as to increase their willingness to visit a certain region and to pay for their travel arrangements.
2.1 Government policies for Implementing KM in Taiwan’s Tourism Industry
In the past three decades, Taiwan has been experiencing an economic transformation from a country with labor intensive industries to a society of knowledge intensive manufacturing and service industries. This was mainly due to the loss of Taiwan’s competitive advantage of inexpensive labor in the manufacturing industry to China and declining investments within this industry. As a result, the economy of Taiwan failed to continue to grow and its government started initiatives to find other areas for market growth, such as the international tourism market development.
Today, international tourism is not only one of the largest employment sectors in most countries in the world, but also has a profound impact on the world economy. Indeed, international tourism contributed to the world economy output about US$ 944 billion last year according to the UN World Tourism Organization (UNWTO, 2009). International tourism receipts represented in 2003, approximately 6 per cent of worldwide exports of goods and services.
A series of national development plans, based on the government’s strategy to “Take action locally to connect to the global village”, have been implemented during the past five years aiming at integrating better KM within the tourism industry. For example, in 2004, Taiwan’s Tourism Bureau of the Ministry of Transportation and Communications (MOTC) implemented for instance the "Doubling Tourists Arrival Plan" and the “Three-year Taiwan Tourism Development Stimulus Plan (2007-2009)” aiming at creating an attractive, unique, visitor-friendly, and high-quality travel environment in Taiwan for international tourists.
In 2008, the Tourism Bureau of the MOTC carried out the “Tour Taiwan Years 2008-2009 Plan “to promote tourism development with an annual budget of approximately US$ 32 million. The objective of this project is to integrate government and private resources to make Taiwan one of the top tourism destinations in Asia. A range of KM initiatives include placing media advertisements, organizing promotional events for SMEs, and supporting local communities to create a hospitable and travel-friendly environment (Tour Taiwan Years, 2008).



2.2. Challenges of KM and Collaboration between the Taiwanese Government and SMEs
KM, used for operational business tools and appropriate technology can help a firm to achieve strategic benefits, such as differentiating services, decreasing promotion costs, and building closer relationships with customers.
The Taiwanese government being actively involved in the development of a knowledge-based economy, and private tour business associates working hard to attain innovative business opportunities in the travel industry, there are, however, critical challenges for the country to implement KM for an improved collaboration between the government and Taiwanese SMEs. One challenge is that the know-how of guiding foreign visitors is generated by the tour guides’ personal experience. Thus, the expertise of the travel business is only known by individual SMEs, which consider knowledge as their competitive advantage in the marketplace. Moreover, there are no KM tools available or specific tour guides training for attracting international tourist to the country. Consequently the quality of the tour associates may not meet the expectations of international tourists, the problems above not being addressed. In addition, even when implemented, the best IT systems cannot guarantee working operational systems as many Taiwanese SMEs struggle with factors that are not related to IT issues, like the dilemma of raising enough capital for these tools and managing them in an appropriate way (Chen, 2007).
Finally, despite the effort of RDEC on e-government planning, one of the biggest challenges for Taiwanese tour associates in regards to the application of KM is to maintain dynamic information in English on their websites. Chircu & Kauffman (2000) for example identified three conversion barriers that limit the pay off and value of IT investments: (1) Resource barriers (2) Knowledge barrier, and (3) Usage barriers. Petre, Minocha & Roberts (2006) pointed out that the reason for this is insufficient information and usability problems with websites. According to Vehovar, Batagelj, and Lozar (1998), non-English-speaking countries face language barriers to globally promote their Websites, and creating and maintaining multilingual website pages requires continual significant translation costs.
In Taiwan, most government and private sectors have difficulties finding a bilingual professional in their organization to manage the English Web site maintenance (Ma & Crestan, 2009). Therefore, while knowledge sharing channels are not developed enough for the tourism development and KM tools, it is very difficult for tour associates to collaborate with the government and other private organizations, and to provide dynamic product information efficiently to their customers.
At last, the government faces challenges to create knowledge sharing mechanisms for the tourism industry as a whole without the support of academic researchers. Although tourism research has grown in recent years, it has been limited to product oriented individual case studies. Also, academic tourism research institutes have received very little government funding compared to other industries such as medicine, technology, and agriculture (Ruhanen & Cooper, 2004). Therefore, the research related to KM and collaboration between the Taiwanese government and SMEs relies heavily on the country’s Research, Development, and Evaluation Commission (RDEC), focusing on KM development for the Taiwanese tourism industry.
2.3. Insufficient English Environment
English speaking not being common in the daily life of Taiwanese travel agents, the average level of English proficiency of the Taiwanese hospitality industry personnel is low (China Post Staff, 2004). As a result, although Taiwan was once one of the biggest exporting countries in Asia, Taiwan’s English speaking environment today is insufficient in both public and private service industries.
The Taipei Times cited research by the British Council, stating that Taiwan is behind in English proficiency (Writer, 2007). The report also quoted statistics from the 104 Job Bank, an online recruitment service, that showed almost half of the jobs in Taiwan require a basic command of English. But although the demand for English in the workplace has gone up, the level of English in Taiwanese has not improved. The director of Taiwan’s Language Center, Shih Chien University, suggests that the average of Taiwanese students’ English ability is below its Asian competitors (Kou, 2007).
However, the 2004 report of the test scores of the Test of English for International Communication (TOEIC) indicates that Taiwan ranked 6th among ten other Asian countries. It shows that the competitiveness of Taiwanese students is being challenged by other countries. Due to the fact that English is a major language in both the academic and business society, low English proficiency may threaten Taiwan’s international competitiveness in the job markets and furthermore, it could impede Taiwan’s economic growth (Kou, 2007).
Finally, in regards to the tourism industry in Taiwan, the report of the European Chamber of Commerce Taipei, sales strategies of Taiwanese travel business associates are not focused enough on the interests of international tourists, causing low inbound tour visitors compared to other Asian countries (Travel and Tourism, 2007). For example, the cost for an experienced English tour guide is high and most Taiwanese travel agents are willing to invest in training costs for existing employees (Ma and Crestan, 2009).

3. Recommendation and conclusion
There is no doubt that effective KM may well enhance the Taiwanese government’s efficiency in collaborating collectively with SMEs utilizing KM practices and tools to better satisfy the needs and requirements of the tourism industry and also to economically develop the country. These practices include better administrative efficiency and modernization at all levels of the government through appropriate KM systems, allowing the government to better collaborate with SMEs associated with the tourism industry. Initiatives, such as the country Cabinet’s e-government that helps transforming of traditional industries to knowledge based economies, need to be further developed and SMEs need to be integrated in these efforts. Moreover, Taiwan’s government must continue to develop programs, which help SMEs and the general public to extend their knowledge and skills base, including training for improved English proficiency, allowing local communities to establish a hospitable and friendly environment for international tourists. Taiwan’s government needs furthermore to continue to help local SMEs to implement KM tools and operating systems in order for them to become more competitive on the international tourism market. In the short run, the best way to utilize non-IT related KM, helping Taiwan’s tourism industry growth, is to develop KM initiatives in regards to English databases for tourism information about Taiwan. For example, “A Glance at Taiwan”, a government website designed by the Tourism Bureau provides free image files about Taiwan, thousands of images being available to the world. Topics include (1) Tourist attractions and landscapes of nature beauty, (2) Museums, memorials and historic spots of cultural heritage, (3) Image of cities, towns and regions of infrastructures, and (4) Folklore, festivals for local cultural activities. However, these databases only provide images and no written information regarding to above topics. Therefore, it is crucial for the government to develop a database that generalizes “tacit knowledge” from tourism experts and converts it into "explicit knowledge" or information for both local tour associates and international tourists. Since “tacit knowledge” comes from the tour associates’ professional experience, the government could implement current market-driven incentive programs of tour promotion and establish reward systems access this “tacit knowledge”, generated from the tour associates’ years of experience, and integrate it into information, which can be used by all stakeholders (government and concerned SMEs). This system would allow the government to get a better hold of tourism related knowledge and make it available to concerned SMEs, which could draw from a large amount of information to improve their services.
In the long run, “the Action Plan for Creating an English Living Environment,” conducted by the government in the “Challenging 2008-National Development Key Plans”, needs to be further developed. The Plan focuses on facilitating English signs, service measures, English proficiency, bilingual websites, and R&D innovations, and promotes nine implementation strategies (English carnival, 2005). The goal of this plan is to establish and promulgate English language programs to prepare SMEs and the public for internationalized living services as well as to establish a professional talent pool, attracting more foreign visitors to Taiwan and strengthening Taiwan's worldwide competitiveness in the international tourism market.
As knowledge is an essential element for economic activity, KM is without a doubt a key factor in determining economic strength for Taiwan. While IT scholars have made a lot of contributions on technological related KM, tourism associates must be aware of this important agenda and adapt KM as a sustainable industry development system. Moreover, the government must play an important role in collaborating with higher education institutions, research centers, and private enterprises to diffuse their research and business focusing on KM within tourism industry.
Thus, academic tourism research must continue to grow and the Taiwanese government needs to play an important role in funding research and development as well as KM initiatives, allowing an improved collaboration between the Taiwanese government and local SMEs developing the Taiwanese tourism industry.

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RE-ESTABLISHING GRASSROOTS INVENTORS IN NATIONAL

RE-ESTABLISHING GRASSROOTS INVENTORS IN NATIONAL INNOVATION SYSTEM IN LESS INNOVATIVE ASIAN COUNTRIES
C. N. WICKRAMASINGHE
Faculty of Commerce and Management Studies,
University of Kelaniya,11600, Sri Lanka
nalakacw@yahoo.com
NOBAYA AHMAD*, S.N.S.A. RASHID** and Z. EMBY***
Faculty of Human Ecology
University Putra Malaysia,43400, Serdang, Selangor, Malaysia
*nobaya@putra.upm.edu.my, **sharifah@putra.upm.edu.my
***zahid@putra.upm.edu.my


This paper conceptualizes novel segmental development strategy through Niche Empowerment on the prioritized area of “innovations.” It argues the importance of a mechanism to improve the utilization and adaptation of available information and local knowledge to create valued activities that generate localized innovations. To do that, without thinking what they do not have, they must try to make use what they have at fullest capacity. More focused mechanism to identify and empower grassroots inventors as supply side community to invent what country needs, moreover help them to commercialize their inventions, would give opportunity to overcome lack of inventions and bridging the cognitive divide of stagnating countries in digital age.
Key words: Grassroots Innovations, community development, Digital Divide, Developing countries, empowerment, Knowledge Economy
1. Introduction
The Knowledge Management (KM) has contributed to the acceleration of the knowledge diffusion and technology innovations in the world. However, present KM practice has focused towards the formal organizational structures and it has over looked the importance of Grassroots level social knowledge (Alavi & Laidner, 2001). Owing to the inherent limitations in defining the appropriate KM approach in the stagnating developing countries, they have not received equal benefits. Continuous improvements of information and communication technologies (ICT) has influenced the expansion of innovations and technology transfer from developed to developing countries. However, due to the disparity in the access and utilization of ICT for technological development, developing countries have been segmented as newly industrial countries, middle-of-the-road and less dynamic or stagnating countries (Wickramasinghe & Ahmad, 2009). With the emergence of the concepts of Community Informatics (CI) and local innovations, community- based initiatives are growing rapidly in less dynamic and stagnating countries. Community knowledge centre, community technology centre, community access programs, Internet, and cybercafés have allowed the community members to improve the social knowledge by interacting more locally and globally (Simpson, 2005). However, the existing digital divide is continuously creating limitations for stagnating countries’ communities to gain the required knowledge level to be competitive and sustained in a digital age. The digital divide is more serious than the binary concept of “have” and “have not” the access to ICT; what matters is its impact on the knowledge creation and diffusion in less innovative countries.
Even though the importance of local innovations for the developing countries highlighted in the literature, the level of technical innovations in the developing countries has been inherently lower (Zachariassen, 1977). As per the patent data, the Sub Saharan African, Caribbean, and Asian countries generally have lower level of residence patent applications (WIPO, 2007). In general, Sub-Saharan Africa, South Asia, Caribbean region, and Latin American regions have comparatively marginalized in technological development, and lacks of innovations are becoming the cause for further marginalization (Arunachalam, 1999; Chantasasawat, Fung, Lizaka, & Siu, 2004). The ICT revolution increases the level of competitive inventions in some of the Asian developing countries, but still there is significant disparity among the Asian countries (Wickramasinghe & Ahmad, 2009).
The aim of this paper is to emphasize the seriousness of the cognitive divide that will arise due to the continuously widening digital divide in stagnating countries in the digital age. It also intends to describe the importance of the amalgamation between ICT, patent systems, and community development movements to improve the grassroots level inventors, and then in conclusion, the paper suggests a community level solution for the economically stagnating countries to narrow down the innovation gap that they are having due to the cognitive divide.
Starting with a discussion of the digital divide, reasons for it and the possible seriousness of the consequences of it especially to developing countries, the paper proceeds to the construction of a relationship between ICT, innovations and modern economic development. Then it discusses the changing nature of the innovation systems in the world by giving focus to patent systems in Third World countries. Furthermore, it points to the importance of grassroots inventions and indigenous knowledge in modern societies. Finally, this paper discusses the grassroots inventors as a supply-side community within the context of demand-driven community development practices. In conclusion, the paper creates a new framework for the local innovation system to empower grassroots inventions in developing countries by combining the elements of bridging the digital divide, building up the supply-side community capacity, and empowering grassroots inventors with a flexible patent system.
2. Background of the issue
Emergence of Digital technologies, Internet and mobile phones is connecting geographically dispersed regions through information more than during any other era of mankind. It has made the pathway to globalization and turned countries into ‘Information Societies’. In an Information Society, citizens are expected to access available information and strengthen their social and economic life better than earlier. Information is expected to empower the citizens to increase their knowledge and rational behaviors as employees, consumers and citizens. Even though the expectation was high, level of participation for the Information Society did not achieve the expected limits. The majority of the average population is excluded from technology access for various reasons (Husing & Selhofer, 2002). This exclusion is not only for the modern digital ICT such as computers, the Internet, mobile phones or satellite communication, but also for the analog media such as radio, television and fixed phones. Even though the world is excited about mobile and satellite phones, some parts of the world are still having very few fixed-line phone connections. Therefore, the saying that “half the world is yet to make a phone call” is still pertinent to highlight the significance of the disparity in access to communication (BBC, 2003).
Owing to this debate on partial inclusion of the population to access the ICT, the term ‘Digital Divide’ has established in the world. The Digital Divide marks “the gap between individuals, households, businesses and geographical areas at different socio economic levels with regard to their opportunity to access information and communication technologies and their use of the Internet for a wide variety of activities” (OECD, 2001). According to this definition, it is clear that there are at least four layers of the digital divide. The digital divide can be at individual level, entity level, national level and international level. Despite the fact that the layers are separated conceptually, they are actually interconnected. A digital divide in one layer can be either an effect or a cause of a digital divide in another layer.
The main reasons for the digital divide are identified as lack of economic resources and infrastructural capabilities required to use technologies (Husing & Selhofer, 2002). This argument is applicable for all the layers identified from individual to international level of access to ICT. Even though the economic reasons are highlighted, the current digital divide is multi-dimensional. The International and national level disparities happens to be explained by economic reasons, but most of the inner-layers of the digital divide, entity and individual layers, are influenced by the attitudes, capabilities and the knowledge of handling the technology (Wills & Tranter, 2006). Digital literacy and computer literacy are playing major roles to expand or narrow the gap of the digital divide. Some researchers have revealed that “lack of interest on computers and internet” is also contributing to the digital divide (Lenhart, 2001).
According to the literature, the symptoms of a possible “knowledge gap” due to an information divide were identified even before the computer and internet revolution (Tichenor, Olien, & Donohue, 1970; Goldmark, Kraig, & Eginton, 1977). “Segments of the population with higher socio economic status tend to acquire information at faster rate than the lower segments, so that the gap in knowledge between these segments tends to increase rather than decrease” (Tichenor, Olien, & Donohue, 1970). Therefore, the countries that went up the development ladder with the first generation information revolution of printing machines are already experiencing a higher socio-economic standard. It laid the knowledge foundation to create, absorb and adapt modern ICT as a knowledge disseminator. Countries that failed to see the benefits of the first revolution showed very slow progress in their socio-economic development until the second and third revolutions in ICT. China, India, Korea, Thailand, Hong Kong and Taiwan are becoming modern day innovative countries with the knowledge created and disseminated by the expansion of digital technologies. Unfortunately, at present some of the countries that affected by the existing knowledge gap are desperate to move ahead with the knowledge revolution created by modern digital technologies.
It seems that the digital divide is not the outcome of low economic standard, but it is becoming the cause of it (BBC, 2003). However, the less-developed countries have not considered the consequences of the Digital Divide. The digital divide would exclude citizens from up-to-date information on events, technologies, inventions and possible problems. The segments that do not have access to information will gain lesser knowledge and be trapped by deep marginalization. Most of the Sub-Saharan African and South Asian countries are showing very marginal improvements in utilizing ICT in a wide variety of socio-economic activities in order to gain better economic standards. Existing marginalization leads them not to be involved in ICT revolution, and they believe they have other priorities. The argument that providing access to information for the people is as important as providing food for the hungry, health facilities for ill people and employment to unemployed youth is not yet justified in most of the developing nations (BBC, 2003).
3. ICT, Innovations and Development
Modern ICT has drastically increased the diffusion of knowledge around the world. Not only the direct impact of the Internet as the knowledge depository, but also electronic versions of newspapers, podcasts and online video streaming of television channels are becoming popular. The traditional mass media are also indirectly influenced by the Internet and digital technologies, and becoming efficient and more effective in information delivery that affects everyday life of citizens (Tracy & Anderson, 2001). Therefore, modern-day citizens who are equipped with information and exposed to dynamic environments appear to be more rational and creative. By utilizing ICT smartly, societies can transfer technological knowledge among citizens and rouse their innovative capabilities to localize those technologies. However, the problem is, it would not happen automatically in stagnating countries and calculated effort is needed to cultivate it.
According to the “Knowledge Gap” theory even though the same information is available to all, receivers absorb it differently. The absorption capacity is based on their communication skills, existing knowledge of the phenomenon, relevant social context, selective exposure, acceptance and retention (Tichenor, Olien, & Donohue, 1970). A famous example of this difference is the “falling apple story” behind Isaac Newton’s theory of gravity. Before he thought about why an apple falls down rather than going up, millions of people saw apples falling down rather than going up. Isaac Newton absorbed this everyday phenomenon speculatively and discovered one of the most important theories of mankind. Therefore, not only the access, but also the cognitive level of the individual plays a significant role in the continuity and growth of knowledge. Knowledge is more complex than information and it includes tacit elements (Polanyi, 1966). Development of ICT to bridge the digital divide is not just about increasing the access and affordability of citizens, it is also about the increasing awareness and utilization of information to create knowledge.
A higher level of ICT capital stock allows a typical economy to achieve higher growth with the given level of labor and capital inputs (Tseng, 2008; United Nations, 2007). Improvement of ICT has its impact on world innovation in two ways. With the improvements of ICT, information availability has been raised multiple times; hence, innovators have been able to innovate more inventions rapidly. Secondly, ICT itself has grown as an industry with a significant number of innovations for software and ICT related products since early 1980 (Commission on Interlectual Property Rights, 2002). Drastic developments of global telecommunication itself occurred mainly due to the continuous research and development effort by companies, research institutes, as well as individual inventors who enthusiastic on innovations and patents (Trainer, 2007). However, learning and adaptation of new technologies does not transfer inventive skills and know-how knowledge from one country to another, unless it is embodied in social and cultural practices in that country. The Least Development Countries Report, 2007, published by the United Nations stated that, “unless less developed countries adopt policies to stimulate technological catch-up with the rest of the world, they will continue to behind over the other countries technologically and face deepening marginalization in global economy” (United Nations, 2007). Therefore, the importance of developing ICT and utilizing ICT to develop internationally competitive inventions is explicated in a modern day development agenda.
4. Conditions demand for innovations in less innovative countries
Innovation is an attractive tool, which enables less developed countries with creative skills to gain economic advantages (Wu, Xu, & Zheng, 2004), but one still needs to remember that the process of innovation is not the same thing as creativity (Minagawa, Trott, & Hoecht, 2007). That process needs to be stimulated by providing the incentives and opportunities. Anyone could have a good idea, but it is only an idea; creativity cannot be considered as part of innovation, if it does not offer real value to those who might use it (Cullen, 2007). The offering of real value relates with the expansion of capabilities to do valued activities. Output of the activity can be either a tangible product or an intangible product. Even though the valued activities include the activities that generate income for the economy, the whole range of public activities that contribute to physical, psychological, and social well-being of the citizens should also be considered as valued activities.
At the international level, developed and newly industrialized countries are claiming 95% of the patents in the world (Noorbakhsh & Paloni, 2001). Apart from the traditional determinants such as natural resources, access to market and low-cost labor, current technological capabilities, an educated labor force to carry out R&D activities, and efficient intellectual property systems are becoming factors of production that are more demanding (Shefer & Frenkel, 2005). Most of the governments of developing countries are continuously changing their infrastructures, investment policies, tax policies and intellectual property rules and regulations to encourage foreign investors to invest their countries without having much effect. The developing countries with a sound combination of all the determinants are becoming dominators in attracting foreign direct investments (FDI). Especially in Asia, technologically stabilized countries led by China and India attracted 2/3 of the world FDI inflow. Remaining portions of the FDI are largely shared by countries like Taiwan, Korea, Singapore, Thailand, Malaysia and Indonesia. Therefore, the competitiveness to attract FDI to the developing countries in South Asia, Latin America, Africa and Caribbean regions are diminishing rapidly (Chantasasawat, Fung, Lizaka, & Siu, 2004; Noorbakhsh & Paloni, 2001). This has created a situation where 5% of the population in the world creates the majority of technologies and next 95% are forced to accept and adapt to these technologies. This technological dependency is inappropriate and costly practice for majority of the countries (Fabayo, 1996).
The current understanding and discussion of the disadvantage of less innovative countries is incomplete. The low level of technological development does not merely a problem of policy and infrastructure; it is a problem of craft utilization of available resources. The developing countries might not have natural resources, but most of them have ignored human and traditional intellectual resources. Without thinking what they do not have, they must think about what they have and make them use at the fullest capacity in technological development. Even though they are late, this lateness still can be converted to an opportunity. According to Wu, Xu and Zheng, 2004, there are at least five advantages of lagging behind the first movers. Less time is needed to grope in the darkness of technology, mature technology and skills can be acquired from first movers, leapfrogging can be achieved when a technology trajectory is clear, the success of pioneers sets a good example, and assistance is available from the first movers. In order to gain the economic and social well being of the citizens, stagnating countries need to encourage the use of digital content and patent system as incentive tools to motivate the ‘inventors’ to creative ‘local innovations’.
The strengthening of property rights, investing money on ICT infrastructure development and relaxing the import policies to satisfy the requirements of other countries or multinational companies (MNCs) to gain FDI flow has discriminated the local inventions in stagnating countries and hence, the practice is counter-productive (Fabayo, 1996; Gupta, 2009). Even though there is discussion on harmonizing the patent process by implementing a standardized universal patent process, economically and technologically marginalized countries need to give serious attention to decide the best-suited patent system for their countries, specifically addressing local issues (Commission on Intellectual Property Rights, 2002). In order to convert the digital content available in the Internet to local innovations, a certain level of cognitive process needs to be executed by individuals (Nonaka, Toyama, & Konna, 2000). Hitherto stagnating countries lack the capacity to generate inventions that are new to the world. The creative imitation and reverse engineering of existing technologies would be a better solution to gain the advantages of secondary innovations (United nations, 2007; Wu, Xu, & Zheng, 2004). Therefore, modern-day patent systems in stagnating countries need to address the development of the local technologies rather than serious protection of the invention or the inventor of the west (Kingston, 2001).
5. Re-establishing Grassroots level inventors in Innovation system
In an innovation system, either formal organizations (companies, universities, and research institutes) or independent inventors invent all the innovations. Independent inventors invent their inventions without having any obligation to third party and they are group of ordinary people who utilize their knowledge and resources to solve existing technical problems of the society. Owing to the fact that developing countries do not have multinational companies, FDI and resources to invest in formal research and development activities, the contribution of independent inventors in the technological development in developing countries is expected to be high (Weick & Eakin, 2005). Even at the worst conditions, that discourage inventions, independent inventors develop the majority of available inventions that are coming to the patent system in the developing countries (IFIA, 2006). Hence, the developing countries need to identify independent inventors as the key intellectual resource that completes the local innovation system (figure 01).



Figure 01: Triangular relationship of ICT, Patent system and Inventors

Because of the independent inventors are common people of the society, they are defined as the grassroots inventors (Gupta, 2000). In the rest of the paper, grassroots level is defined as “ordinary people” and any person who invents anything outside the formal organization structure is considered as “grassroots inventor”. In most of the developing countries, private sector organizations are given permission as a driving force of the modern- economic development. However, private sector neglects the importance of R&D activities and continuous innovations as strategy to gain competitive advantages. Therefore, grassroots inventors’ community is needed to be identified special economic niche that would help to overcome the lack of innovations in stagnating countries.
Grassroots level inventions can be modern as well as traditional. Modern inventions are defined as the products or processes that invented to facilitate current-day requirements with the assistance of relatively new technologies, products and processes (Franke & Shah, 2003). The traditional innovations, more relate to the traditional practices available within the communities. The Asian countries with a very long history have well established traditional knowledge that indigenous people have brought down with them from earlier times via oral tradition (Sen, 2005). According to Sen., Indigenous Knowledge (IK) is embedded in community practices, institutes, relationships, and rituals. IK can be technical or non-technical, rational or non-rational, tacit in nature, transmitted orally or through imitation and demonstration. In order to make use the IK for development of other communities, IK needs to be identified, validated, recorded, stored, disseminated, tranfered and exchanged in a accpetable manner. It gives opportunities for further value additions and modernization of the traditional local knowledge. Modern ICT, such as vedio recorders, tape recorders, databases and Internet can be used in various stages.
Recent discussions on promoting appropriate technologies in the developing countries have highlighted the importance of local innovations. Human development report, 2001, acknowledged the relationship between technology and development in developing countries. It concluded that poor people need more innovations and access to technology (UNDP, 2001). The Local innovations have played a crucial role in the evolution of knowledge and practice in rural development (Vinanchiarachi, 2006, p. 2). Owing to these discussions, there is an emerging trend towards promoting social and community level local innovations in the developing countries (Deka, Qutub, Barbaruah, Omore, Staal, & Grace, 2009; Wettansinha, Wongtschowski, & Waters-Bayers, 2008; Prolinnova, 2009; IFAD, 2009).The Rural communities in developing countries are observing, adapting, experimenting, and innovating as part of their daily work. In order to overcome the social problems in rural and poor agrarian communities in developing countries, organizations like UNDP, UNIDO, IFAD, World Bank and NGOs have initiated grassroots innovation development projects (Hansen & Egelyng, 2006). However, these community development movements are top-down and demand driven projects that are trying to satisfy the social needs of the pre-defined marginalizeed communities. The social and community innovation promotions have focused on rural communities and the concentration has given more to the problem oriented community innovations. It focussed on the “social innovations in communities” rather than “community of technical innovations”. The current practice of promoting community and social innovations neglects the patent applied grassroots inventors from their attention. The practitioners think the existing patent system as an obstacle for the grassroots innovation (Gupta, 2009). How to address issue of the grassroots inventor invented something with the expectation of getting a patent and commercial exploitation is remain unanswered.
Industrial boom, that started soon after the World War II created a question of grassroots inventors’ future in western countries. Schumpeter (1942) started the technological expansion debate by saying; formal institutes will replace individual inventors (Schumpeter, 1942). Nevertheless, after 15 years later in 1957, Schmookler pointed out “Most of us believe the independent inventor is dead and buried. Most of us believe too, that invention today has become the exclusive stamping ground of the Ph.D. working in the laboratories of large corporations, surrounded by mysterious instrument panels, electronic brains, but they are still exists.” (Schmookler,1957). In his study, he highlighted the importance of identify those who are engaging in inventive activities. At that period in USA, more than 35% of domestic patents were issued to independent inventors. Scotchmer has expected the end of the grassroots inventors in emerging digital revolution by saying, “the technological imperative put innovation beyond the reach of basement tinkerers” (Scotchmer, 2004). However still there are significant number of independent patent applicants in industrial countries like Norway, Ireland, Belgium, Austria, Finland, France, UK, USA, Canada, Australia, Italy, and Denmark (Amesse & Desranleau, 1991; Sirilli, 1987; Sorenson & Vidal, 2004; Wills & Tranter, 2006; Moussa, 2001). In the developing countries the contribution of grassroots inventors is much higher than the industrial countries, but they are been ignored and under studied (Weick & Eakin, 2005).
This problem is significant in the countries with high proportion of independent patent to applications. Sri Lanka is a South Asian country with high ranked proportion of independent inventions in the national innovation system (Sri Lanka National Intelectual Property Office (NIPO), 2008). Even though the commercialization levels are not very promising, during 2000-2008 the independent inventors forwarded 77 percent of the patent applications in Sri Lanka and in the year 2007 and 2008 the proportions raised to 80 percent and 85 percent respectively. However, their inventions not capture the attention of either formal innovation promotion or the grassroots level innovation promotion practices. In order to avoid this scope limitation and the ignorance, the Grassroots inventors that defined in this paper comprise the independent inventors who are involving in technical inventions with the intention of intellectual property protection and commercialization of the inventions.
6. Grassroots inventors (GRI) as a supply side knowledge community
The products, processes, or practices developed by the Grassroots inventors can be direct solution or tentative solutions (that need some modifications) for other communities. By allowing Grassroots inventors to communicate, interact, and transact between each other as a network, they can develop novel solutions and modify available product and processes (Franke & Shah, 2003). In an environment, which patent system and stakeholders of the innovation system encourage grassroots inventions, realization of bottom up solutions for the problems faced by the marginalized communities would be able to achieve at a grater pace than earlier years (Chung, 2002). By identifying, assessing, and empowering grassroots inventive community, they can be encouraged to invent the technical solutions to the requirements of the communities, societies, and countries. Therefore, Grassroots inventive communities of the society are actually provide solutions to the existing social and technical problems of the communities. As far as they supply solutions, tools and techniques to the society, they needed to be identified as “Supply side community”. The Capacity building and empowerment of supply side communities will not only give the chance to solve their problems by their own, but would solve macro level socio-economic problem of the general society as well. The Grassroots inventors have the capabilities to provide technical innovations to industrial problems of a country. Therefore, they need to be identified as important innovation niche of the less innovative economies.
As far as cooperate visions, missions and formal objectives of the formal organizations and life threatening social issues of their communities not create the boundaries on their innovations, they are “seamless inventors” who can invent the products and processors to satisfy the bottom of the pyramid needs and national level requirements while improving the technological innovations of the country.
7. Conclusion and Discussion
ICT is a powerful tool that increases the knowledge revolution and diffusion of technology. However, not all the nations are getting the benefits of it. The Digital divide is recognized as one of the major hindrance of marginalized sections of the world to be involved in knowledge revolution taking place in other parts of the world. However it is more complex than the binary concept of ‘have’ and have not’. It is a matter of how to utilize ICT to do value activities. The value activities include the innovations and knowledge creation. The disability to engage in the innovation and knowledge creation in knowledge era has given serious disadvantage for some of the developing countries. The lack of basic competencies in current era, majority of the countries in South Asia, Sub-Saharan Africa, Latin America and Caribbean regions have been unable to attract FDI and improve the large-scale R&D investments to be competitive innovative nations. The less innovative countries do not have slack resources to working on it and the fulfillment of basic human needs has given a higher priority. In order to avoid the existing stagnation to be a permanent scenario, concentrated narrow scoped initiatives at the identified segments of the national innovation system would be an effective strategy within the boundaries of all the negative conditions of these countries. Without thinking what the less innovative countries do not have, they must try to make use what they have at full capacity.
Even if the scenario is unfavorable to independent inventors in the digital age, still there are large number of garage tinkerers in Asia, who convert their ideas into powerful inventions and demanding for patents. Hence, the local innovation systems need to have provisions to motivate these rare heroes. In the setting of Inventions are becoming vital important aspect of the economic development, independent inventors in less inventive countries need to be identified and considered as supply side community niche. Specific mechanism need to empower them to invent what community needs and help them to commercialize their inventions. Instead of trying to provide solutions to the problems and issues created by unfavorable economic environment, national innovation system should be changed according to the real problems and issues of the inventive community. Implementing niche empowerment strategy, countries can narrow down the focus towards requirements of limited number of inventors that can be more manageable within their available capacity. This would give opportunity to overcome the competency mismatch and bridging the cognitive divide of less innovative countries in coming ages.
The Grassroots inventors, community development, ICT, and patent systems are the major players in proposed niche innovation system for the developing countries (Figure 02). The success of proposed strategy depends on the holistic transformation of the key elements of the innovation system. The community development needs to have more holistic scope than the current practice. It should not narrow down to the demand side issues of rural villages and specific capacity building and empowerment effort in rural communities. The Patent system needs to be more flexible, affordable and encouraging the local requirements and the independent inventors. ICT policy of the country needs to bridge the digital divide of grassroots inventors. It should include the ICT infrastructure and knowledge required to utilize the resources for their innovation activities.














Figure 02: Key elements of proposed hybrid innovation system

All four elements of proposed innovation system are inter-related and achievement of individual element does not guarantee the achievement of desired objective or any other element. Therefore, the entire system needs to be identified holistically rather than in isolation. More focused mechanism needs to identify and empower grassroots inventors to invent what community needs and help them to commercialize their inventions. It would give opportunity to the less innovative countries to overcome lack of inventions and bridge the cognitive divide in the digital age. This would be the appropriate macro level Knowledge Management practice that give benefits to the less innovative countries to re-established the social and technical knowledge of grassroots inventors in national innovation system to interrupt the continuity of the deepen in the marginalization.


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