business competitiveness through technology

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Enhancing RuralEnhancing Rural

BusinessBusinessCompetitivenessCompetitiveness

Through TechnologyThrough TechnologyThomas G. JohnsonThomas G. Johnson

Rural Policy Research InstituteRural Policy Research Institute

University of Missouri ColumbiaUniversity of Missouri ColumbiaMarch 22, 2007March 22, 2007


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Information and CommunicationInformation and Communication

Technology: The IssuesTechnology: The Issues

Digital divide?Digital divide?

Advantage or disadvantage for ruralAdvantage or disadvantage for rural

regions?regions?

Endogenous growth or externalEndogenous growth or external

investment?investment?

Is infrastructure all that is needed?Is infrastructure all that is needed?


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Dimensions of the Digital DivideDimensions of the Digital Divide

1.1. IncomeIncome

Poorer people and poorer placesPoorer people and poorer placescannot afford access to Internetcannot afford access to Internet

2.2. IT literacyIT literacyTechnical skills limit access for some.Technical skills limit access for some.

3.3. GeographyGeography

Peripheral and sparsely populatedPeripheral and sparsely populatedareas are much more expensive toareas are much more expensive toserveserve


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The Vicious Supply/Demand CycleThe Vicious Supply/Demand Cycle

High cost of

Infrastructure

Deployment

Weak demand

for ITC

services

Not attractive

to New

Economy

employers

Low and

declining

population

density


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Digital DivideDigital Divide

Demand aggregation:Demand aggregation: Number of users must be high enough toNumber of users must be high enough to

reduce unit costs to acceptable levels.reduce unit costs to acceptable levels.

When larger firms and governments haveWhen larger firms and governments havededicated access, demand is insufficient.dedicated access, demand is insufficient.

Competition:Competition: In rural areas ICT is frequently provided byIn rural areas ICT is frequently provided by

monopoliesmonopolies

Dynamics:Dynamics: New technologies will always be rolled out inNew technologies will always be rolled out in

urban areas first.urban areas first.


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regions?regions?





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Advantages for Rural Regions:Advantages for Rural Regions:

Death of DistanceDeath of Distance ICT reduces costs of distance and sparseICT reduces costs of distance and sparse

populationspopulations Information is ubiquitousInformation is ubiquitous

Services can be produced anywhereServices can be produced anywhere Allows distributed scaleAllows distributed scale

Scale economies can be achieved withoutScale economies can be achieved withoutphysical proximityphysical proximity

Improves quality of life in rural areasImproves quality of life in rural areas Tele-work, entertainment, tele-education, tele-Tele-work, entertainment, tele-education, tele-

medicine, on-line services and shopping.medicine, on-line services and shopping.


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Disadvantages for Rural RegionsDisadvantages for Rural Regions

Cost of ICT is often prohibitive for smallCost of ICT is often prohibitive for smallfirmsfirms

Death of distance also increases externalDeath of distance also increases external

competition for rural firmscompetition for rural firms Rural firms not accustomed to new level ofRural firms not accustomed to new level of

competitioncompetition Fewer skilled service providersFewer skilled service providers

Less sophisticated local governmentLess sophisticated local governmentsupportsupport

Less sophisticated entrepreneurship skillsLess sophisticated entrepreneurship skills


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regions?regions?





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Internal or ExternalInternal or External

External firms have advantageExternal firms have advantage

because:because:

More likely to be globally orientated forMore likely to be globally orientated for

sales and procurementsales and procurement

More familiar with their competitorsMore familiar with their competitors


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regions?regions?





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Necessary ConditionsNecessary Conditions

Low cost and reliable infrastructure isLow cost and reliable infrastructure isessential but not sufficientessential but not sufficient

Also necessary (Malecki, 2003):Also necessary (Malecki, 2003): Intelligent governmentIntelligent government

A business culture which promotesA business culture which promotesentrepreneurship (Malecki, 2003)entrepreneurship (Malecki, 2003)

An institutional framework which encouragesAn institutional framework which encouragesinter-firm and public-private cooperation,inter-firm and public-private cooperation,

A dynamic tertiary sector providing businessA dynamic tertiary sector providing businessservices and the transfer of technology,services and the transfer of technology,

A minimum level of R&D capabilities,A minimum level of R&D capabilities, Financial instruments conducive to innovation.Financial instruments conducive to innovation.


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Policy OptionsPolicy Options

Adequate infrastructure at aAdequate infrastructure at areasonable costreasonable cost

Public versus private provisionPublic versus private provision Development led by indigenous firmsDevelopment led by indigenous firms

accessing broader markets, oraccessing broader markets, orexternal firms relocating to ruralexternal firms relocating to rural

areasareas External firms may inspire andExternal firms may inspire andaccelerate adoption among indigenousaccelerate adoption among indigenousfirmsfirms


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Policy OptionsPolicy Options

Quality public and private supportQuality public and private supportservicesservices

Local e-government comparable toLocal e-government comparable to

urban areasurban areas Training and encouragement in theTraining and encouragement in the

use of ICTuse of ICT

Entrepreneurship programs toEntrepreneurship programs toexpand the competitiveness ofexpand the competitiveness of

businessesbusinesses


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business competitiveness through technology

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