The Role of Institutions and Policy in Knowledge Sector Development: an Assessment of the Danish and Norwegian Information Communication Technology Sectors
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University of Denver Digital Commons @ DU Electronic Theses and Dissertations Graduate Studies 1-1-2015 The Role of Institutions and Policy in Knowledge Sector Development: An Assessment of the Danish and Norwegian Information Communication Technology Sectors Keith M. Gehring University of Denver Follow this and additional works at: https://digitalcommons.du.edu/etd Part of the International Relations Commons Recommended Citation Gehring, Keith M., "The Role of Institutions and Policy in Knowledge Sector Development: An Assessment of the Danish and Norwegian Information Communication Technology Sectors" (2015). Electronic Theses and Dissertations. 1086. https://digitalcommons.du.edu/etd/1086 This Dissertation is brought to you for free and open access by the Graduate Studies at Digital Commons @ DU. It has been accepted for inclusion in Electronic Theses and Dissertations by an authorized administrator of Digital Commons @ DU. For more information, please contact [email protected],[email protected]. THE ROLE OF INSTITUTIONS AND POLICY IN KNOWLEDGE SECTOR DEVELOPMENT: AN ASSESSMENT OF THE DANISH AND NORWEGIAN INFORMATION COMMUNICATION TECHNOLOGY SECTORS __________ A Dissertation Presented to the Faculty of the Josef Korbel School of International Studies University of Denver __________ In Partial Fulfillment of the Requirements for the Degree Doctor of Philosophy __________ by Keith M. Gehring November 2015 Advisor: Professor Martin Rhodes Author: Keith M. Gehring Title: THE ROLE OF INSTITUTIONS AND POLICY IN KNOWLEDGE SECTOR DEVELOPMENT: AN ASSESSMENT OF THE DANISH AND NORWEGIAN INFORMATION COMMUNICATION TECHNOLOGY SECTORS Advisor: Professor Martin Rhodes Degree Date: November 2015 ABSTRACT The Nordic economies of Denmark, Finland, Norway, and Sweden outperform on average nearly ever OECD country in the share of value added stemming from the information and communication technology (ICT) sector. Early investments in computing and telecommunications, supportive social democratic institutions, and effective innovation/technology policy, help to explain overall Nordic ICT performance. Cross- country variation persists in sector outcomes, however, and cannot be reduced to differences in institutions and policy. Denmark and Sweden have moved toward liberalization while Finland and Norway maintain commitments to social democracy and yet Finland and Sweden outperform Denmark and Norway in ICT sector development. Institutionalists explain the successes of Finland and Sweden through lighthouse effects, cluster dynamics, institutional adjustments, and policy initiatives, however there has been comparatively less research on the lagging countries of Denmark and Norway where none of the aforementioned conditions fully explain aggregate outcomes. My analysis focuses on the underperformance of Denmark and Norway by identifying the role of intra-sectoral dualism in which institutions and policy favor certain firm types over others. The research indicates that limited liberal reforms in Denmark benefit startups and small firms through increased labor freedoms, risk-based financing, deregulation, and strong cluster dynamics. Conversely, the dismantling of ii institutional supports, organizational restructuring, and labor redundancies has eviscerated large incumbent firms. In Norway, statist social democratic institutions and innovation/technology policy entrench domestic incumbent firms through state ownership, regional protectionism, and extensive regulation. Startups and small firms are less successful due to crowding out in labor and financial markets, cluster fragmentation, and the lack of targeted sector supports. Taken together, Danish and Norwegian outcomes in ICT are lower on aggregate because institutions and policy favor certain firm types over others causing intra-sectoral dualism. iii TABLE OF CONTENTS Chapter One: Introduction .................................................................................................. 1 Topic: Nordic ICT ................................................................................................... 6 Application: ICT, institutions, and policy ............................................................. 11 The puzzle of Nordic ICT ..................................................................................... 23 Relevance of the research ..................................................................................... 26 Way forward ......................................................................................................... 27 Chapter Two: Nordic Capitalism, Policy, Outcomes, and Analytical approach .............. 29 Origins of Nordic ICT ........................................................................................... 29 Institutions ............................................................................................................ 32 Innovation/technology policy ............................................................................... 50 Nordic ICT sector outcomes ................................................................................. 67 Model specification, case classification, case selection, and method ................... 78 Chapter Three: Comparative Capitalism and Sector Development .................................. 82 Literature review ................................................................................................... 83 General arguments ................................................................................................ 94 Chapter Four: The Danish ICT Sector .............................................................................. 99 Origins of Danish ICT .......................................................................................... 99 Danish ICT today ................................................................................................ 102 Institutions .......................................................................................................... 104 Innovation/technology policy ............................................................................. 124 Outcomes ............................................................................................................ 138 Single case conclusion ........................................................................................ 145 Chapter Five: The Norwegian ICT Sector ...................................................................... 148 Origins of Norwegian ICT .................................................................................. 148 Norwegian ICT today ......................................................................................... 151 Institutions .......................................................................................................... 154 Innovation/technology policy ............................................................................. 180 Outcomes ............................................................................................................ 206 Single case conclusion ........................................................................................ 215 Chapter Six: Comparing Danish and Norwegian ICT Sector Outcomes ........................ 220 Divergence through intra-sectoral dualism: Testing the hypotheses .................. 220 Commonalities of Danish and Norwegian ICT development ............................. 232 Chapter Seven: Conclusions, implications, and additional research opportunities ........ 236 Conclusions ......................................................................................................... 236 Implications ......................................................................................................... 240 Additional research opportunities and possible future developments ................ 241 References……………… ............................................................................................... 252 iv Appendix A – Open-Ended Interview Template ............................................................ 284 Appendix B – Interview Responses (Deidentified) ........................................................ 287 v LIST OF TABLES Table 1.1 All economic activities within the ICT sector .................................................. 13 Table 2.1 European Working Conditions (5th) ................................................................. 47 Table 2.2 Two-by-two classification matrix ..................................................................... 80 Table 4.1 Danish ICT sector by share of firms, revenues, and employees ..................... 104 Table 4.2 Highest attained education of the population 15-69 years .............................. 109 Table 4.3 Danish annualized private equity investments ................................................ 116 Table 4.4 Business enterprise R&D expenditure by industry (ISIC 4) in DKK M ........ 131 Table 4.5 Startup firms by status and location – International ....................................... 145 Table 4.6 Startup firms by status and location – Domestic ............................................ 145 Table 5.1 Norwegian ICT sector by share of firms, revenues, and employees .............. 154 Table 5.2 2012 Highest attained education of the population 15-69 years ..................... 159 Table 5.3 Norwegian annualized private equity investments ......................................... 169 Table 5.4 Government budget appropriations/outlays for R&D in NOK M .................. 188 Table 5.5 Business