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GGR221 Lec 6

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University of Toronto St. George
Deborah Leslie

Next week Tutorial (SS 1083) Lec 6 Innovation and Clustering February-24-14 Tues: 1-3pm office hours 1:03 PM Future of the Canadian Automobile Industry? - Key challenges? Increased competition with Mexico, and esp since NAFTA …. Now Mexico is the cheapest site, and ○ ○ International Competition from Mexico and other countries like Korea, and China ○ Looming trade agreements (Canada has signed a trade agreement with the EU)  S Korea and Japan have important impacts  Trade initiatives are important  Auto Pact and CVA - guaranteed that a certain amount of  NAFTA eliminated the CVA  US South = cheap in wages ○ Labor costs  Only 4% the cost of the car is paid to the workers  62% = parts and supplies  4% on advertising and engineering  8% on management  4% profit margin  12% taxes - Solutions? ○ Possible solutions  Rethinking Canada's Auto Industry (CAW), 2012 (suggested some solutions)... a) Integrated National Auto Policy - Canada is the 4th largest producer of aero support - Canada needs a coordinated ... - Ontario has Green Energy Act b) Consistent auto investment program - We need long term strategies c) Canadian footprint commitments - Reintroduction of Canadian value added restrictions - See companies who sell cars in Canada, incentivized to produce the same amount of cars sold in canada - e.g. give subsidies to firms to help them invest - Or give them credits to help offset end of life vehicle deposits - Require firms to produce same amount sold in Canada d) Accumulate public minority shares - GM and Chrysler - During the recession, 2008, these companies were asked to bailout - "GM" knicknamed "Government Motors" e) Build a Canadian OEM - Original automobile manufacturer - Magna Canada f) Rethink automotive trade policy - Skeptical on the EU trade deal - This trade deal has negative impacts (esp trade deal with Korea and japan) g) Intervene to reduce value of Canadian dollar h) Build a green auto industry - Environmentally friendly automobiles i) Buy-Canadian procurement policy j) Investment in human and physical infrastructure Innovation and Clustering - Agglomeration: the tendency for industry to cluster in a particular region or place  Counter tendency for firms to cluster within a region  Great deal of recent interest in agglomeration and clustering in successful regions, such as Silicon Valley, Third Italy, Toyota City, Baden Wurttemberg □ These are highly successful agglomeration sectors □ Increasing employment of geographers to help develop cluster strategies - Lundvall argues ○ Capitalism has entered a new stage in which knowledge is the most important resource ○ And learning (accumulating knowledge) is the most important process ○ Knowledge: a framework, or structure in which information is stored, processed and understood  Diff from information  Knowledge is Information that has been interpreted,  Given context and  Put into context with values and beliefs (or particular commitments)  Anchored in belief systems ○ Knowledge is important in many industries not just auto industry Knowledge typology (Asheim and Gertler, 2005): there are 3 kinds of knowledges, and these knowledges dominate in ○ diff industries 1) Analytical Knowledge (know WHY) - Scientific laws and models - Trying to explain the way things are - WHY something is like that - Explain why things are the way they are - Argue that this kind of knowledge involve intense exchange between research and analysis Lectures Page 1 - Argue that this kind of knowledge involve intense exchange between research and analysis - Science based, bio-tech 2) Synthetic Knowledge (know HOW) - Applying existing knowledge - Applied previous knowledge in diff ways - Problem solving - Practically oriented - Argue that it is more on HOW to do something 3) Symbolic Knowledge (know WHO) - Aesthetic knowledge - Centered around style, design, imagery, social trends etc… - TV / film, fashion - Understanding people, cultures and design trends - Important in cultural industries - Knowing WHO the market is, knowing the right people - Its about WHO you know, and having the right networks  Diff kinds of knowledge is important in diff types of industries  This typology is significant in learning about what will help you be successful in diff industries - Low-road strategy vs. high road strategy  Low-road: competing based on cost (cheaper, ….)  High-road: firm competes on value added (product with higher design, higher value, improved qualities) ○ Depends on the generation of new knowledge and the commercialization of that knowledge ○ Find application for knowledge (commercialize knowledge) ○ Argument:  Industrial industries like Canada can not compete  Must continue to learn - Codified Knowledge: refers to formal, systematic knowledge that can be converted into writte form through programs or operating manuals ○ Knowledge that can be written down, or visual form ○ Something that can be captured in an image or manual, picture or diagram, or in writing ○ Something that can be written into a program/manual, easily learned and can be communicated to others (verbally or visually) ○ Something that can be traded ○ Commodified and sold (like a patent) you can sell it to others ○ Knowledge that can be conveyed or transferred to others ○ "knock-off" and sell at cheaper price (take original and modify it… and sell it for cheaper) - Tacit Knowledge: refers to direct experience and expertise which is not communicable thorugh written documents ○ Can not be copied ○ Practical knowledge, intangible ○ Must do it to learn it ○ Watch someone, be somewhere (place-based) ○ Apprenticeship, watching what they are doing ○ On-the-job training, working with someone,..etc ○ e.g. skill-trades (cooking, machinery, ..), all of the arts (symbolic knowledge = almost always tacit). ○ e.g. engineer (codified and tacit knowledge; some are practical, and some rely on tacit knowledge) ○ A form of practical know-how embodied in skills and work practices of individuals or organizations ○ Murano Glass  Skilled craft  To pick up this skill… you have to learn it from someone else who is making it  Understand heat, subtle techniques, develop keen sense of touch  Art that only can be 'passed on'  Through years of practice and experience  Can not be learned immediately - Globalized world… ○ Codified knowledge is thorugh to be accessible anywhere = global (mobile)  University curriculums have become standardized  Standardization of academic curriculums - codified globalized knowledge ○ Tacit knowledge = inherently local  Embedded in specific places  Only learned through face-to-face contact
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