Unclassified DSTI/ICCP(97)12/FINAL Organisation de Coopération et de Développement Economiques OLIS : 28-Jul-1998 Organisation for Economic Co-operation and Development Dist. : 03-Aug-1998 __________________________________________________________________________________________ English text only Unclassified DSTI/ICCP(97)12/FINAL DIRECTORATE FOR SCIENCE, TECHNOLOGY AND INDUSTRY COMMITTEE FOR INFORMATION, COMPUTER AND COMMUNICATIONS POLICY OECD WORKSHOPS ON THE ECONOMICS OF THE INFORMATION SOCIETY WORKSHOP No. 6 London, 19-20 March 1997 English text English only 67862 Document complet disponible sur OLIS dans son format d'origine Complete document available on OLIS in its original format DSTI/ICCP(97)12/FINAL FOREWORD The OECD Workshops on the Economics of the Information Society are aimed at developing economic data, research and analysis in the area of “Global Information Infrastructure -- Global Information Society.” They are conducted under the aegis and direction of the ICCP Committee as the precursor for policy discussions within the Committee. The workshops concentrate on providing leading edge research on the economics of the coming “information society”, will have a quantitative and empirical focus and identify and refine the analytical and statistical tools needed for dealing with these issues. The sixth in the series of Workshops was held in London on the 19 and 20 March 1997 on the theme of “Market Competition and Innovation in the Information Society.” The Workshop was co- organised by the Science Policy Research Unit (SPRU) of the University of Sussex, UK, and the Institution of Electrical Engineers (IEE), together with the European Commission and the OECD. Overall co-ordination of the workshop was carried out by SPRU. The London workshop focused on issues associated with market competition and innovation in an information economy because these are essential tenants for economic growth, and establishing an environment for attaining healthy competition and active innovation have, and continue to be, key public policy objectives. But the market behaviour of firms and the process of innovation is poorly understood in those sectors which are key to the Information Economy (e.g. software, network services, hardware). Here a premium is placed on intangible assets, establishing networks and protecting intellectual property. A shift in emphasis to these factors could have implications for the structure of the economy (small vs. large firms) and how firms interact in that economy. On the occasion of this Workshop, leading experts from major economic research centres, academic bodies, consultancies, industry groups, think-tanks, as well as government officials, presented their views and ideas for discussion. It provided the opportunity for interaction and debate on the economic impacts and policy implications of electronic commerce from various aspects, provided a stimulus for further research and highlighted priorities for future investigation. This report outlines the highlights of the contributions and discussions at the Workshop, and provides a list of participants. The OECD acknowledges with thanks the support and enthusiasm of all those involved. Copyright OECD, 1998 Applications for permission to reproduce or translate all or part of this material should be made to: Head of Publications Services, OECD, 2 rue André-Pascal, 75775 Paris Cedex 16, France 2 DSTI/ICCP(97)12/FINAL TABLE OF CONTENTS FOREWORD..................................................................................................................................................2 POLICY IMPLICATIONS.............................................................................................................................4 PROGRAMME..............................................................................................................................................7 RAPPORTEUR’S SUMMARY...................................................................................................................16 SUMMARIES PROVIDED BY SPEAKERS..............................................................................................46 CONTRIBUTIONS BY SPEAKERS...........................................................................................................52 AUTOBIOGRAPHICAL NOTES..............................................................................................................169 LIST OF PARTICIPANTS.........................................................................................................................189 3 DSTI/ICCP(97)12/FINAL POLICY IMPLICATIONS The discussion of market competition and innovation in an information economy underscored a number of implications for public policy, extending from a basic need for policy makers to ensure that they are better educated and informed about this new economy to the fact that the basic data which are required to evaluate the efficacy of competition and innovation policy in information sectors was lacking. The policy implications fall into three broad areas that are each further developed in the Rapporteur’s summary: 1) improving communication with the policy community, 2) the implications of network economies on competition policy and 3) challenges for SME policy. 1. Interacting with the policy community Many participants agreed on the need for greater attention to broadening the public’s and policy makers’ understanding of developments beyond the relatively small community of those “in the know”. The current policy agenda is strongly influenced by the need to accelerate job creation and economic growth, and there are many influential voices in the policy community that regard information society issues as peripheral to, and in some countries, counter to these central concerns. The following policy implications emerged: • Revive interest in the problems of technology transfer. Both within nations in the improvement of higher education teaching the development of skills that are relevant to industrial needs and between nations in assuring that what is now being learned about business and other organisational transformation becomes available to developing nations. • Develop an understanding of how information and communication technologies can aid in the profound structural transformation underway as we move toward the information society. • Do no harm. Even with improved knowledge of the changing situation, policy interventions, particularly in the area of regulation, were increasingly hazardous due to the difficulty of providing timely and comprehensible information to public officials. • The market can not provide all the solutions. The need for providing safeguards that ensure market competition is heightened by major changes in industrial structure and significant challenges to the competitive operation of markets. This raises concerns about the outcomes that may be achieved through processes that are entirely market-led. 4 DSTI/ICCP(97)12/FINAL 2. The impact of network economies The utility of many products in the information economy grows as more people join a network which in turn attracts new members to the network. This can create “lock in” on certain technologies, giving early leaders a competitive advantage and reducing the acceptance of innovations. Research is needed to analyse the impact of network economies on market competition and innovations more carefully. In particular, the workshop identified the following areas in need of attention: • Is there a potential for such networks to erect substantial barriers to entry or create other barriers to competition? The general conclusion of the discussion was affirmative. The difficulty of commercialising new complex system “platforms” allows incumbents to exert market power over their suppliers. Similarly, when a network is established based on the control of intellectual property rights there are significant risks that the market power legitimately conferred by these rights may be extended more broadly, either to bind the network together more tightly than would otherwise be possible or to create market power in areas where it would not otherwise exist. • Is there a boundary between the organisation of such networks for improving innovative performance and for achieving market dominance? Here the general opinion of the discussion was more qualified. There is likely to be both private and social value in transforming competitors into “complementors” when the result is the more rapid development of new markets or the avoidance of duplicative “zero sum” research and development efforts . In many cases, networks require a co-ordinating entity or a “trusted third party” to manage exchanges, particularly in areas where security considerations are present. And frequently, network co-operation means the creation of shared assets whose value may depend upon the persistence of the network relationship -- in some cases it can be durable and in other cases fleeting. 3. The challenge for SMEs Information and knowledge are important sources of innovative opportunities and management challenges. Thus firms, such as SMEs, that lack the resources to develop, acquire and use information will be at a disadvantage. Policies could be developed that seek to mitigate this problem by: • helping SMEs develop effective strategies for acquiring knowledge; • expanding policies beyond diffusion oriented policies to include advice on how to use IT to enhance and ultimately transform business processes where potentially larger gains may