Knowledge And Competitiveness -Hungarian Aspects
Doctoral Workshop
Ruzsa, Csaba; Krisztián, Béla
Competitiveness is always in the focus of general economic studies. The establishing and strengthening of competitiveness is part of companies' strategy and a significant feature of their innovative behaviour is the ambition for persistent technical development. This may happen with the purchase of developed technologies and by their import into the existing systems. The professional skills regarding these systems also need to be provided for. In the centrally controlled economies, large labour structures were built up in the context of big-size companies, meanwhile technological development was also relatively standardised. In addition, vocational training was also adjusted to this system.
The economic organizations became restructured due to change in ownership. The diversified organisation and technical equipment of numerous small and middle size companies operate on the basis of logic of competition and capital expenditure adjusted to market conditions. The flagships of globalization are multinational companies and the inner logic of the process is efficiency. In the competition, the increase in productivity is still the engine of economic development and the ratio of intellectual work has increased as well. This relates to the expansion and efficiency of knowledge-based economic activities including transformative, especially IT technologies. The application of technology itself does not increase the productivity of intellectual work, since the dynamics of intellectual work also depends on the operators' preparedness. As a result, a key factor in competitiveness is the quality of disposable human resource.
The globalisational procedures of the 20th century drew spotlight to competitiveness and performance of major communities and regions. It is accepted generally due to Schumpeter's publication that innovation is the main engine of economic development in our age. [1] As a result, enormous intellectual and material resources are dedicated both to the research of this question and to education of the current knowledge in this respect. Economic role of "knowledge” (and fast adaptation) appreciated, technological development, innovation have become the main source partly of companies' competitiveness and partly the global dynamics beyond national economies. Labour and capital, the two traditional engines of quantitative expansion, contribute less and less to development.
Numerous definitions are known for competitiveness. So, competitiveness is the ability of companies, industries, regions, nations and supranational regions to establish a relatively high level of employment and factor income on a sustainable basis while it is exposed to international competition. On the contrary to the technical, technological changes and the factors laid out by Schumpeter, Drucker[2] drew attention to the fact that competitive knowledge is not of technological but of social feature. „Technologically, there was no real new development when the body of a truck was taken off the tyres and placed on a transport vessel. The container innovation does not derive from technology but from the new way of thinking that the transport vessel is seen as a tool for storing and moving goods and not as a ship, consequently the period of time spent in the port is shortened. However, this „lousy” innovation quadrupled the traffic of oceanic transport vessels. Even the incredible increase of world trade could have not come to life in the last forty years…” innovation is not related to technology, since modern society is fundamentally changed by management”[3] Modern technology has extensively spread in the „traditional” industries (in handicraft activities as well). Human capabilities allocated to organisations create knowledge, new information triggering new ideas, in a new context based on experience and interpretation. The modern economy puts emphasis on the needs for educated labour; however the needs are valued in a different way which may be reflected in different leadership strategies.
A wide-scale technological future prospect project was launched in Hungary in 2000. The working groups set up for this project analysed the following key issues on a time horizon of 10-15 years: (1) human resources (2) health and life sciences, (3) IT, telecommunication, media, (4) environmental protection and protection of built environment, (5) production and business procedures, (6) agribusiness and food industry, (7) transport and traffic. The technological prospects can contribute to reports on future competitiveness of industries and technologies. This method is applied at micro and macro level as well. Companies usually apply two types of this method. The first one is derived from expected future demand, it is market-driven. [4] These prospects are based on potential market-society needs, therefore this analysis is compiled by social professionals (sociologists, psychologists, economists), not by technical professionals. In this process, experts try to forecast future needs based on expected social changes, conditions (feasibility barriers are not taken into account).
The second method is based on the future application methods of existing technological solutions; it is technology-driven (e.g. importing new technologies, putting priority on product development). This task requires mainly scientific and technological experts. The participants intend to clarify how the existing technological solutions and their combinations can be developed to future marketable products. In both case, human resource is valued, however, in a different way.
The pragmatical strategic leadership focuses mainly on long-term tasks. The human capital- and human resource-driven leadership develops the skills and working ability of the staff. The expertise-driven leadership puts effort on maximal exploiting of the company's ability (competence). In the so-called „box method”, the management determine values, rules, procedures for each activity of the staff. The change management prepares the organisation for a continuous adaptation. In practice, top managements generally apply a mix of these methods depending on leaders' personality and company profile, as a result, put more weight on some of them. The chosen strategy is modified every 5-10 years due to changing market conditions.
The increasing need for trained workforce does not only come from technological development. The changes in the structure of production leads to new consequences. The main condition to create and sustain competitive edge is the knowledge management of human resource at a wide (nationwide) and a narrow (company) scale. The consequences of technological development in the labour market, employment structure and wage differences are monitored continuously.
Technological development is generally measured by any form of capital. These indicators can be the level of capital equipment in labour, the ratio of new capital, increase in capital equipments, output/capital ratio, increase of capital stock or output or simply changes in time. Intensity of research and development, expansion and number of patents, changes in microprocessor-based procedures can also be measuring indexes. Technological development can also be measured by economical structural changes, modifications in technology and leadership.
These changes influence the knowledge base of organisations. Implementation and spreading of knowledge are the most important changes. The human knowledge base was expanded for millions of years on a spontaneous basis, while today knowledge is enriched by its systematic „production”. The procedural steps of knowledge creation mainly include research activities (observation, scientific experimentation, creation of concepts, ideas) and certain attitudes (positive or negative approach to applied research, innovation, industrial needs).
In the last decade, the attention regarding knowledge creation methods was globally drawn to concept drawn up by Nonaka-Takeuchi. The authors set out that new knowledge is formed in the connections of participants of knowledge creation procedures. This connection network can be created as a result of certain social or group framework conditions with respect to interactions between tacit and explicit knowledge. The seeds of new knowledge can generally be created in the procedures of knowledge socialization by changing tacit knowledge among people, observation, imitation, at work, at a meeting or even at (office) lunch. In the next phase (externalisation) the dialogue among experts transforms tacit knowledge into explicit one – occasionally through change of experiences, models - that is incorporated into the existing knowledge base by combinational procedures. Finally, the new explicit knowledge is combined with the tacit one due to internalization procedure. The entire process is called knowledge spiral or SECI model – based on the initials of the four procedural parts – in professional literature.
Knowledge is applied if companies introduce a new production technology (organisational method) or a new product is launched in the market. The formal and non-formal can be described as: in-house application, researchers co-operate with industry, launching research results to the market, marketing etc.
Knowledge can be spread by formal and non-formal procedures that help basic and applied research results to become part of public knowledge. These procedures can be described as education and postgraduate programmes, meetings, seminars, conferences, publications, and sales of knowledge products at a large scale on the other hand.
The expansion of knowledge with respect to organisations can be internal or external. Internal sharing of knowledge is defined if a new part of the organization starts to apply the new knowledge. In case of external sharing, a person(s) or an organisation(s) start to apply new knowledge.
Knowledge economy itself presumes knowledge quality that can be reached by higher education and development of human resource. Competence that is highlighted in this procedure has appeared in all training areas.
Competence is an important, controversial issue. It is reflected in many aspects, e.g. „Human competence cannot be copied precisely. We all develop our own competencies by practical mistakes, speculations, repeats.”[5] Competence is „intelligence in the broadest sense, operative intelligence including to know „how” moreover than just to know „what”.
Competence means „to know how to interpret”, namely, knowledge can be applied in different ways. To determine competence, many efforts are made from pedagogy to conclusions regarding its measuring scheme. Competence is not attributing but a relation between knowledge and its holder. There is no competence for anything at any time, since it can be defined in a certain role, time and context. People in the organisation use their competence to solve problems namely to create values. This cannot be only determined by rules and regulations. Many assume that if a person can solve a problem, the same person can also solve the next problem as well. This could only be possible if we discovered elements in a human brain that are independent of every specific feature.
Main features relating to human resource (labour) need to be determined beyond possessing knowledge and the wide-range definition of competence. One of these features is skill that clearly point out at the abilities, experience, knowledge of the working person and at the activities where these are demonstrated. This is significant in judgement since it is about the relation between human qualities and the assigned task. A person can be skilled in one profession and unskilled in another one. The person in question may be seen as human resource as „talented” (talent, different capabilities, sense, bent that can be strengthened by pedagogical tools (education, training). Talent can be divided into three groups: cognitive, interactive and powered talent. Talent is more than expertise since talents may be applied in different activities, occupations. Cognitive talent is the condition for any creative activity, the interactive talent is necessary e.g. in education and in leading an organisation, while powered talent is important in case of a mechanic or a sculptor. Human resource can be generally described as schooled, trained, cultured that is determined with respect to the time spent in different parts of education.
Significant decisions in knowledge production are related to education, training (educational, training investments). These are of great importance for the organisations, since investment decisions are not only related to the purchase or establishment of a tangible or immaterial asset. These decisions can usually be made only after giving answers to strategic questions. The results determine that the company to which market which product can be launched, which market can be obtained, or what kind of service may be introduced to a new market.
By the examination of these questions, a company can decide which asset to invest in the sources available. Therefore, the fundamental strategical decisions are also meant to be part of investment decisions.
Instead of investment decision, a different expression that describes this process much better could be applied: strategic asset allocation.” The leadership can express different views with regard to asset allocation. Farkas – De Backer's empirical surveys found that successful leadership at (major) US companies can be classified into five categories (behaviour types).[6]
Intangible assets include capitalized value of original contribution, restructuring costs, research and development costs, intellectual property rights, company value or goodwill, intellectual goods, prepayments for intangible assets, value modification of intangible assets. The investment in intangible assets is an investment of funds into areas where the market position of the company can be strengthened. These investments may include research and development, training of labour force, social investments and the certain areas of marketing such as image development. Tangible investments also include money allocation into valuable assets (real estate, art pieces), however these are not relevant for our topic.
The definition of intangible assets in (Hungarian) accounting rules and as a result the definition of intangible investment differ from the definitions laid out above. Based on the principle of prudence in accounting, intangible assets include the non-material goods that can individually be identified, the sources allocated can clearly be controlled as well as future profit is expected and predictable. Accounting rules define as investment the one-time major expenditure of these assets, namely, only their value proportional to their obsolescence can be deducted as cost (assuming their continuous return from revenues).
This causes a problem since the accounting rules interpret intangible assets and investments in a very „narrow-minded” way, while the development of more and more companies rely on the non-material resource, „knowledge capital”. „Knowledge capital is intangible and lives in the head of people – namely, the value of intangible goods from the visible capital and the invisible part of capital.” The major part of investment in human capital (e.g. training) is not defined as investment in the accounting rules (the result can neither be determined, nor controlled and future profit is not guaranteed either). The investments in education are determined as costs in accounting and decrease the income. This existing controversy leads to a number of problems such as distortion in the shareholder value (generally defined as company value), negligence (in the profit-oriented view) in development of the most important resource and one-sided valuation of investments. Based on the accounting methods above, it is no surprise that resource handling and asset allocation mainly deal with material assets, material fund management (the expression „investment” generally refers to this category as well.) The difficulties relating to education arise from this view and it seems very cumbersome to be changed. It is difficult to list and classify the different jobs and professions, to clarify their knowledge content and to run a flexible educational and training system under these circumstances.
However, the necessity of knowledge is judged differently. The significance of technological development that appreciated labour force was justified in numerous research studies, however, this impact is depreciated by the sensitive indicators of vocational training and diminishes the role of education in the end.
The human resource investments can be divided into two categories at national and global level as well. The first one is to „labour force appreciative” view, the second one is a depreciative or neutral aspect. The application of developed technologies and expertise as a condition to competitiveness and the different views raises the question: How can researchers come to different conclusions from the statistical analysis on real economy? On the one hand, this may be due to the fact that researchers apply different indicators for technological development and on the other hand, the different context and preconceptions may also lead to different results and interpretations.
The latter one seems the most important factor. The preconception is dependent on the definition of expertise and developed technology, consequently, many results are already given. Technological development can change work in three ways. It can abolish work that is not necessary any more (demand erased or replaceable), or can create new jobs for new products and services. In the third case, the old work is transformed with new technology. This transformation has impact on the employment structure, on special requirements relating to labour force and qualification. It is a strategical goal to apply these requirements and their application can be carried out by trainings and education. A specialized vocational knowledge is neither equal to qualification nor to profession. A person may have general work or professional knowledge, however, this person cannot have specialized expertise in general, only with respect to a certain activity, vocation or profession. This hinders the efforts to compile a module-based and competence-driven system.
The question is simplified in a way whether certain tasks require more professional tasks due to technological development or not? Does the level of qualification need to be modified consequently?
On one extreme, it cannot be stated that certain abolished (but partly reclaimed) professions required lower level of professional knowledge than the new ones. Most of them were high-level handicraft works. The necessary skills and knowledge were acquired individually or in small groups by preserving traditions, in a longer learning and practical phase and resulted in developing manual skills. There were/are simple works that could de dealt with even by a child.
On the other extreme, the researchers, developers, maintenance people of the most modern tools must have high level knowledge, however, simpler skills are sufficient for the operators.
The activities renewed by technology stand, as we say, in the middle of necessary knowledge, their fulfilment requires general knowledge and preparedness. The classification of necessary knowledge is dependent on a reliable basic educational system and the teaching of work culture in order to sustain appropriate performances at the general and individual levels of human resource. The quality of basic education enables human resource to provide the necessary knowledge – not more or different – at the level of group or individual.