The second megatrend is the rise of knowledge-intensive intangibles. Value is rapidly migrating out of tangible goods and services that are becoming commoditized and into the soft intangibles that encase them. These intangibles arise from specialized, upstream knowledge (R&D, patents, inimitable organizational routines, software, training) and downstream knowledge (brands, trademarks, customer service) activities. This migration of value has dramatically magnified the importance of innovation, concomitantly shortening technology lifecycles.
How do emerging and developing economy locations enter GVCs? Are locations that undertake low-value, routine activities like assembly forever doomed to low value creation and relative poverty? If not, how do catch-up processes in poorer countries operate? Will advanced economies face ever-increasing inequality as their low-knowledge populace descends into poverty? Or are there processes and policies that can ameliorate such a frightening future? As leading knowledge clusters become increasingly connected to each other across national borders, what will happen to peripheral regions within advanced (e.g., the so-called “fly-over” states of Middle America) as well as emerging economies (e.g., interior China)?