DKE Part 3: Information Econ

DKE Part 3: Information Econ

1. Increased opportunities

   • SMEs
   • Large corps use external knowledge resources to give competitive advantage
   • Large corps = Venture Capitalists

2. Low Barriers to Entry

   • internet reduce costs of entry for startups: >$5000 + labour VS >$250,000 in 90s
   • Open Source Software; Cloud computing, cheap online accounting, legal services

3. Convergence

   • E-delivery:
     • Improvement in supply chain mgmt
     • new ways of doing business
     • digital disruption

4. Network Externalities

   • networks -> entre's: Strategic Alliances
   • between Social and Business entres
     • Ecological Sustainability Innovations
   • Since 1950s shift from large firms innovating to entre econ
   • Complexity & Turbulence of KBE -> greater Uncertainty -> Firms disintegrate to form Networks
   • Cohesion

5. Aus Start Up Scene

   • E.g. Atlassian, Freelancer.com; Owen Kerr (Pepperstone online forex)
   • Pros
     • well networked
     • vibrant
     • strong success stories
     • good overseas connections
       • US, UK, Asia, EU
     • readily available seed money $100K
     • Good human capital
   • Cons
     • lack of venture capital funding
     • lack of workld-class broadband
     • little govt. support, policy ,funding

6. Information Economics

   • study of agents and institutions concerned with the production, communication and consumption of information.
     • adds information dimension to neoclassical
     • Information = resource with costs
     • economics of inquiring communicating and deciding
     • Info = public good
   • Productivity growth via Innovation not longer hours / higher wages

7. Processes of Knowledge Production, Diffusion, Storage & Use

   • adsorb a large proportion of resources in the economy
   • knowledge industry: >50% of output related to knowledge activites / processes.
   • +ve externalities
   • Govt finances:
     • education
     • media
     • R&D grants, tax concessions, R&D by govt (CSIRO)
     • telecomms
     • WHY?
       • Public Good, with positive externalities
       • Avoid Market failure
   • Technology technology results in continuous change
     • No Equilibrium
   • Info Econ given insigts into:
     • Lack of efficiency of market mechanisms
     • public policy (market & govt relations)

8. Key Features of Information

   • Inexhaustible
   • Accumulative: value enhanced by disemmination; synergy when new info added
   • Intangible but can be embodied in Goods & services
   • public good:
     • non-rivalrous, indivisible, inexhaustiable
       • Tech clusters gain from econom of scale (incr. returns).
         • Comparative advantage of large monpanies in knowledge industries
         • Networks more attractive, give exponential returns to members
     • free-rider problems
     • Problems:
       • Digital distribution of knowledge goods
         • Music, News: Moving from physical to digital distribution'
         • need to overcome disruption by changing business model to adapt
           • Piracy
         • Knowledge resource allocation:
           • tech allocated by non-market mechanisms
     • Non transferrable: Both retain.
       • Therefore any trd of knowledge incr. stock of knowledge in the economy (Social Benefits)
   • Funded by:
     • Government (Taxes)
     • Charity
   • Asymetry
     • 1. Do Due Diligence
     • 2. Use laws to force companies to be transparent
     • 3. Ethics