Governing Innovation in the Information Society: the need to account for the intangible dimension [15 Mar 05]

[15 Mar 05]
See the links at the bottom of this post

Following the recent entry on 'The Evolution of the Blog Innovation, Risk and Governance' the aim of this article is to disentangle some of the issues emerging from the innovations brought about by the information economy and society and the related changes in enterprise patterns, organisation, development and governance.

Together with the work of leading scientists such as McLuhan, Bell, Castells (please see also the bibliography on 'Innovation and Responsibility in the Context of the Information Society' and related Call for Comments) an important reference for this essay will be Professor Roberto Panzarani's latest book titled: Il Viaggio delle Idee: per una Governance dell'Innovazione (The Journey of Ideas: for a Governance of Innovation).

Within this framework, telecommunications and Information and Communication Technologies undergrid global trade, finance and knowledge and have thus become strategic for the sustained growth of the economy of industrialised nations, as well as to increase well-being of less developed nations. The webs of knowledge that these technologies support are fundamental not only to create, but also to strengthen the dynamics of technological innovation which in turn generate more productivity and value added. However, 'whereas in the past the main focus was on product specific and/or other 'physical' innovations, the novelty is that innovations related to intellectual property, software and services have become the most debated and controversial themes for countries adopting, implementing or renewing their legislations [*]' as well as for firms which face the challenge and need to manage and account for the role of intangibles creating new dimensions, operations and revenue possibilities.

In the context of the information society, investment in physical resources is not any longer the main determinant of innovation. The emphasis instead shifts to the quality and sustainability of partnership networks and the resulting ability to use ICT and related technologies to extent the platform of the organisation and combine it in new and dynamic processes and systems able to build new knowledge. Thus, as Panzarani stresses, innovation depends greatly on the quality of human resources, their technological expertise combined with an organisational culture where appropriate reward systems are used to incentivise cross-functions interchange and mobility.

The information economy calls also for a redefinition of the notion of 'capital'. Panzarani summarises three main modes of capital conceptualisation, namely structural, human/intellectual and relational. Structural capital has to do with patents, brands, software and other internal processes. Human/intellectual capital delineates the talent as well as the effectiveness of internal management and the relationship with clients and other stakeholders. And finally relational capital is about the system of the web of knowledge which the productive structure is able to control through the management of the relationships developed with internal and external stakeholders. In sum, the information society creates new dynamics also within the realm of the economics of national systems of innovation and poses new challenges and new responsibilities for the running of economic and social organisations.

The new dominant character of this analysis is about intangible resources' contribution to corporate competitiveness and economic growth. And the need to acknowledge a paradigm change of their contribution to the value of an organisation's overall resources is what is mostly referred to in the new context of the information society and economy. In standard economic analysis for instance, value is measured by the derivation of 'residual factors' assuming that all the information about a firm's activities can be included in its production function. However, the irruption of the intangibles' dimensions challenges that notion of measurability of value. It can be argued that the greatest contribution to the value of an organisation is not any longer the residual factor of its inputs, but the constitutive elements of its entire structure. Intangibles are not just inputs, but are also combined to create outputs and are also used within the strategic framework of firms' evaluation beyond their market value.

As Professor Roberto Panzarani points out in his book, the recognition of the importance of intangible resources for a firms' operations is one of the key dimensions to strengthen and support the process of innovation of firms, economies and societies. The way in which a single organisation manages its resources and competencies as well as functions and processes is fundamental to create the critical mass required to promote innovation and change at the aggregate level. However, due to the difficulty to capitalise on intangibles one of the greatest challenge lies in the identification of the appropriate methods to identify and attribute value. Intangibles in this respect are 'non-separable' and as Panzarani elegantly puts it: 'innovative ideas as such do not serve the purpose of generating a competitive advantage since they cannot be patented'.

In the context of the global information society those in charge would find it increasingly harder to define a modality of identification of meaningful signals to respond to the dynamics of market and environmental change. Governing the innovation in these new circumstances of chaos and turmoil requires to adopt a notion of innovation which resembles its perceived social value and congruence instead of its residual value. Therefore there is a urgent need to extend the focus of alignment and cooperation from close boundary organisations to society as a whole. Governance is about organsiation, 'organisation is the knot, the fold, where order and disorder meet. It is the very process of transgressing the boundaries between the old and the new, the stable and the unstable' (Clegg, Kornberger & Rhodes, 2005). Concluding with a quote from Professor Panzarani's book: 'Innovation is not only a technical matter, a rigid method which determines the success of an idea, or intuition or suggestion, it is instead the fruit of a mental attitude, of a psychological predisposition which needs to be fuelled with research, debate and the encounter of many points of view'.

[*] See entry on 'Conceptualising Innovation' in this Blog.

For other information about Professor Panzarani's book see also in this web-site:

- The post written by Paola Previdi in the Topics section
- The most recent entry in Diabloghi. (In Italian only).
- The front cover and back cover citation of the book in Segnalazioni. (In Italian only).

If you would like to comment on this entry, provide further elements of reflection or add hindsight please write me at: