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Is Your Economy Built on the World’s Best Knowledge?

November 24, 2011

Now and then, over the years, a government agency or NGO issues a report that is startlingly insightful and useful. However, because of several odd factors (for example: they can’t be commercially advertised) these reports often don’t come to the attention of many who might actually have some use for their information.

If you doubt this, take a look at the recent publications list of the World Bank, the U.S. Department of Commerce, or the United Nations. You might well be surprised at both the mass of empirical data they gather and, on occasion, the innovativeness of a study’s conception and underlying ideas. In this spirit let me introduce you to just such a report: Networks for Prosperity: Achieving Development Goals through Knowledge Sharing (here is a pdf), just published by the United Nations Industrial Development Organization and the Leuvan Centre for Global Governance Studies.

The study grew out of the recognition that, in a developing nation, cultivating a thriving private sector is fundamental to sustainable economic growth—and that the world already knows a lot about how to do this. Developing countries stand to benefit enormously from other nations’ accumulated knowledge about what works in private sector development, but often lack access to that knowledge and face hurdles in adapting it to their specific contexts and needs. In addressing that problem, the study gives credence to a subject many of us have been recently thinking and writing about, which is the importance of knowledge networks.

By way of definition, knowledge networks are densely connected sets of people and institutions (often both public and private), gaining and sharing know-how relevant to each other’s efforts around the globe. Networks can be developed consciously or arise in evolutionary fashion; either way, their value is in their production and dissemination of knowledge. Think of them in contrast to affiliation networks, where network members value the ability to connect with others who share their “likes” (as in a fan club or political party), or helping networks—devoted to marshaling resources to provide aid where needed. Of course there are, in addition, commercial networks that help firms accomplish commercial aims, and all sorts of personal networks that seem to offer as many kinds of value as there are networks themselves.

This new report provides, first, the evidence that greater networking means stronger development (although, in typically careful language, the authors only claim it “outlines a method for demonstrating” that link). Arriving at this finding took some serious work: how does one measure the relative connectedness of nations? This team identified objectively measureable indicators of networking activity and combined them into a Connectedness Index. It turns out that nations of the world are highly variable in their overall levels of connectedness. Then, it looked at those rankings in light of the level of economic success the nations enjoyed. The result was a strong positive linear relationship between connectedness and four key performance indicators: government effectiveness, regulatory quality, competitive industrial performance, and GDP per capita PPP (purchasing power parity).

Since I know you’re wondering, the top five connected countries are Switzerland, Sweden, the Netherlands, the United States, and Finland. Contrast these with Georgia, Tanzania, and Bangladesh, which come in at the bottom of this 75-country study. (See page 70-71 of the report for the full rankings.)

Now one might quibble with this type of index as well as with the methods of how it is compiled, but my impression is that it seems pretty accurate. More important, moreover, than determining if Brazil truly ranks a peg higher than India is raising the awareness that knowledge networks are valuable, and a country’s connectedness to them can be gauged. Better measurement makes it possible to see where interventions will be effective—which is of course, why the UN sponsored the study.

The report doesn’t only issue a scorecard. It also features many, many cases detailing how countries have benefitted from their encouragement of and participation in knowledge networks. In fact, there is more substance and valuable information in this work than in any commercial book available on the subject—and this in a free report that few people will ever know about! The authors discuss how networks really work in practice in terms of their dynamics, roles, processes, structures, and governance models. A strong finding is that knowledge networks, like many other forms of interaction, need care and attentiveness and goals for their success. They don’t just happen—or at least when they do just happen they often quickly fail unless overt actions are taken to make them durable and valued and well structured.

Those of us who don’t work in economic development but instead focus on managing our own organizations and teams can take away the same lessons. And certainly, many managers already have a broad awareness of the value of knowledge networks. Still: wouldn’t it be fascinating to see this kind of study replicated in the corporate world? I suspect from the few academic studies done on the subject that it would also reveal a high correlation between connectedness to the world and performance outcomes. But how would those rankings stack up? What companies might end up near the bottom of a connectedness index, the business equivalents of Moldova and Burkina Faso?

We might never have that particular insight, but again, what matters is not the ranking but the focus it puts on knowledge networking. Both policy people and corporate managers should seriously assess their network capabilities, usage, and goals. Circulating this fine report among a management team would be a great way to get the conversation started.

Larry Prusak

Larry Prusak is an independent consultant who has co-authored 12 books and many articles. He currently teaches at Columbia University’s MS Program in Information and Knowledge Strategy.


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