The intellectual capital needs of a transitioning economy

Abstract

Purpose – Developed economies with high-cost environments face industrial transitions from scale-based manufacturing (MAN) to knowledge, technology and intangible asset-based sectors. The purpose of this paper is to examine the changes in employment and value-adding profiles of transitioning industry sectors in Australia and discuss the implications for policy that influences the intellectual capital (IC) profile of industrial sectors in transition. Design/methodology/approach – The approach borrowed concepts from the firm-level strategic management literature and applied them to a macro level of industry analysis. In this paper the authors examine the transitions in the Australian economy which, due to a rising cost base, is experiencing a decline in its value chain-oriented MAN sector. The authors contrast four industry sectors with the MAN sector and examine the different value creation models. Findings – The findings clearly show how the contribution to employment and value added (termed Economic Value Contribution ) of the different sectors vary. The authors extend these findings to a discussion on policy and the dimensions of IC that may have a role to play in facilitating transitions within an economy. The main conclusion is that a more rapid transition and higher value may be created if innovation and entrepreneurship are facilitated by targeted policies in transitioning sector. Research limitations/implications – This work is based on a single country analysis of selected industry sectors. Further work needs to be done across many more countries to contrast the findings across nations/regions that differ in industrial complexity and to refine the analytical framework to improve construct validity and increase analytical power. Practical implications – This work has implications for policy-makers facing the challenges of a transitioning economy, whether national or regional. Governments that are hands-on with respect to interventions to salvage and/or extend the life of sectors are at risk of missing opportunities to build the capacities and capabilities of emerging sectors while those governments that are hands-off, deferring to market mechanisms, risk transitions that are too little and/or too late to maintain a national or regional competitiveness. Originality/value – To the authors knowledge, this is the first attempt to integrate the specific firm-level strategic management perspectives, used in this paper, with the macro-policy level to examine industry sectors with the twin metrics of economic productivity and employment in transitioning economies.