Universidad Federal do Rio de Janeiro

Visit Summary
We visited the Federal University of Rio de Janeiro on Friday, 10 Dec 04. Dr. Lebre la Rovere of the Institute of Economics gave a lecture on her paper entitled: "Information Systems and the Economics of Innovation (dated 12 Oct 04)."

The abstract of the paper reads as follows:

"This paper assumes that globalization poses competitive challenges to small and medium-sized enterprises (SMEs) that can be surpassed if these firms insert themselves in networks. The first section discusses how SMEs can define a competitive strategy. The second section shows how the insertion of SMEs in a network, especially SMEs that belong to a local productive system, can enhance their competitiveness. The third section discusses how information systems can structure a network of SMEs. In the concluding section issues for future research are discussed."

Mainstream economics assumes that all economic agents have the same information. "Evolutionary Theory" says that firms have different information and come up with different responses. The technology paradigm is characterized by mass production and just-in-time availability of goods. Firms can be "path dependent." The "New Institutional Economy." Both of these emphasize innovation. Innovation is very important for competitiveness. Firms that are flexible have a greater chance for success.

SMEs face a variety of obstacles to competitiveness. Their decision-making process is different in regard to: access to capital, survival concerns, and absence of strategic thinking.

Networks of enterprises are "institutional ways of organizing economic activity based on the coordination of regular cooperative relationships that are established between agents." They are formed with the objective of enabling SMEs to compete more successfully with larger organizations. Horizontal networking stimulates innovation. Vertical networking stifles it through over-specialization. Information systems can support such networks.

Forming networks can help the SMEs to overcome inherent limitations. They do this by generating "positive externalities." (An example is a new road, as opposed to "negative externalities," such as pollution). In addition, they generate "active collective efficiency gains." Cluster relationships may also develop trust, but this is dependant to some extent on geographic locations since physical proximity is important in building friendships.

Quality is very important. Formal networks are needed in emerging countries, because they do not have the established tradition. For example, French cheese producers meet informally, but they are supported by 500 years of tradition and quality standards are already well established.

Another important concept is that "the implementation of information systems in networks of SMEs has to aim to promote communication between the enterprises and institutions so that they can develop collective action and establish cooperation links to obtain sustainable competitive advantage."

SME networking is still largely conceptual at this time. Dr. Lebre la Rovere concludes that "more research needs to be done on the implementation of systems in networks of enterprises."

We then had a discussion in regard to IT Readiness, and in particular, the educational standards in Brazil. The following issues were identified:

• Large differences in the distribution of wealth in Brazil.
• Pace of urbanization - 2/3 of the population now lives in cities.
• Focus did not shift to education until 1985, and now the problem is huge.
• Fewer than 50% of the population have access to education.
• Looting the schools is a problem, so now the government is having the schools built by the community to increase the sense of ownership.
• Private schools are good; most university students come from there. The universities are good also, because they support the middle class and the wealthy. It is the public schools that are problematic. There is a government initiative to put a computer in every school, but there is a lot to be done to address the quality of the schools overall.
• There are no standardized tests or teaching methods.
• Deflation has caused university budgets to decline over the last ten years.
• Basic issues still exist: feeding the children, making sure they go to school at all.