© Scandinavian Journal of Information Systems, 1995, 7(1):99–120

AbstractThis paper discusses different policy optionsfor the diffusion of information technology(IT) in rural areas. An IT programme for thenorthern part of Norway is assessed, and theeffects of the programme are compared withthe consequences of the ongoing diffusion ofIT in the region. The analysis shows that theprogramme initiated some successfulprojects, but that it as a whole had minor ef-fect on the diffusion and use of IT in the re-gion. The conclusions are that technology dif-fusion programs should be integrated intogeneral development strategies, and that oneshould put emphasis on stimulating innova-

tions and learning processes locally. Whiletechnology push strategies are likely to be in-fluenced by outside controlled forces, marketpull efforts can more easily be adapted to lo-cal conditions and needs. This is not at leastimportant when taking seriously to providenew jobs for women, which is particular im-portant in rural areas.

Keywords: Technology diffusion policies, or-ganisational learning, indigenous develop-ment, rural areas

Rural Development Through Diffusionof Information Technology

Arild JansenDepartment for Business and Management, Finnmark College

Follums rd, 9500 Alta, NorwayArild.Jansen@Hifm.no

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1. IntroductionIn Norway, considerable emphasis hasbeen put on mining a decentralized soci-ety, and to make the living conditionssatisfactory in all parts of Norway. Thedevelopment of microcomputers and ex-tensive telecommunication networks hascaused promising scenarios for rural are-as. Norwegian regional politics havetherefore become increasingly interestedin how telematics can contribute to thedevelopment of rural areas. Various pol-icies and measures have been initiated bythe government to stimulate the regionaldiffusion of IT.1

The northern part of Norway hasbeen defined as a target area for such pol-icies. Due to its long distances and scat-tered population, the region was regard-ed as “an ideal laboratory for developingnew telecommunication services” (NoU83:32). Accordingly, the Norwegian Tel-ecom started a number of projects, bothaimed at general infrastructure build up,and more specific directed towards serv-ice development.2 At the same time,Finnmark County Administration initiat-ed a separate IT programme, in order tostimulate economic development in theregion.

This paper reports from a study3 ofthese different effort. This work also in-cludes a minor survey of the actual use ofIT in the region. The study shows thatvery few efforts have lead to successfulinnovations locally. The general effectsof the IT programme have been small. Inthe same period, we have seen a strongincrease in the application of IT in thevarious sectors of the economy. This hashad substantial influence on work organ-isation and on the division of labour be-tween rural and urban areas.

This paper is organised as follows.The next section provides the theoreticalbackground, followed by a description ofthe research framework. Section 4 and 5contains an analysis of the different pol-icy efforts, along with a discription of theeffects caused by the ongoing user-driv-en diffusion of IT in the region. The lastsection discusses alternative IT strate-gies for development of rural areas.

2. Theoretical BackgroundWe are now experiencing a change in theuse of information technology that caus-es the most pervasive changes in oureconomy, and which are affecting thestructure and management of the enter-prises and the relationship betweenthem. This implies new forms of infor-mation flow and transfer of knowledge,the basis for the network economy. Net-works allow for different types of inte-gration: vertical integration, by closerlinks in the design, productions and dis-tribution systems, and between produc-ers and consumers, as just-in-time pro-duction and flexible specialization, andhorizontal integration, which means alli-ances between individual companies,both within and across different businesssectors.

The infrastructure4 aspects of IT areessential, in that infrastructure is consid-ered as a stabilizing factor in economicdevelopment, in particular for regionaleconomies. These aspects can be viewedfrom two different perspectives:• Computer and telecommunication

networks that support the informa-tion handling activities taking place

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across an organisation, and servingthe users within it.

• Network structures connecting localand regional economies to nationaland international networks, includ-ing the support organisations that arerequired for utilising such services.

Some claim that this development ischallenging the traditional taylorist(“fordist”) pattern of hierarchical control(Boyer 1988), others maintain that weonly see a new, more advanced form ofcontrol (Schulz-Wild 1991).

2.1. Technology and rural developmentThere is an ongoing scientific discussionconcerning the theoretical concept of ru-ral development. It is important to differ-entiate development in a rural area fromdevelopment of a rural area. The first de-fines a rural area as a place of develop-ment, i.e. of markets, businesses, etc.The latter implies “defining it as a specif-ic rural community that has a politicaland cultural identity, and that is morethan an arena of trends that is ubiqui-tous” (Storgaard et al. 1993).

A key question is whether diffusionof technology into rural areas will implyincreased dependence of the nationaleconomy. Or will it lead to more localbased, indigenous developments, and bythat creating more sustainable localeconomies? Indigenous development isrelated to self-reliance, which can be as-sociated to three basic ideas (Johannis-son & Spilling 1983):• to work for development of people,

and not things• to develop a region through autono-

my, by increasing the utilisation of

own physical resources, knowledgeand creativeness, etc.

• to aim at breaking down outside con-trolled structures, and define owngoals for development.

There are, however, a number of prob-lems related to this strategy. It may implyreduced trade and a slowdown of indus-trialisation and other modernisationprocesses. Such consequences requirecountermeasures that can stimulate tradeand industrial development such that lo-cal economies can increase their internalcoherence, e.g. through cooperation andmutual assistance, and not accept ‘splitand rule’ tactics from outside (Galtung etal. 1980).

Some research findings suggest thatthe positive visions of progress in ruralareas through new technologies haveproven difficult to realize, as new and en-during economic crisis has falsified vi-sions in face of reality and facts.Gillespie and Goddard (1990) argue thattelecommunications is a necessary, butfar from sufficient mechanism for re-gional development. They suggest that“…telecommunication strategies cannotbe deployed without reference to theform of development one obtains in aparticular region. For example, the dom-inant form of development in less fa-voured regions is that of the branch planteconomy, associated as it is with highlevel of external control, low local multi-pliers and a narrow range of technicalskills. This form, described as fordist, theinternal economic structure of the regionis highly fragmented and incoherent interms of indigenous linkages.”

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2.2. A framework for regional technology policiesIn most industrialised countries, techno-logical development has been regardedso vital to the economy that it cannot beruled by the market forces alone, andseveral technology policies and strate-gies have been defined (Edquist 1992).According to an OECD report, differenttechnology policy options may be as-signed to different categories (OECD1989), see Table 1.We find that supply side initiatives tendto be pushing for the introduction newtechnology, emphasising technical inno-vations. The demand-side activities, onthe other hand, focus on the user side andorganisational innovations and they haveusually one or both of the purposes:• To improve the efficiency of the

economy by promoting the use ofnew technology

• To stimulate the demand for locallymade new technical products orcompetence.

The OECD-paper points to that for re-gions that are technologically lagging,these two goals may be conflicting. In-sistence on local supply means that theusers not always will get ‘state of the arttechnology’, as it may not be available

locally. But subsidising the access tomore advanced technology makes it stillmore difficult for local suppliers to catchup.

2.3. Innovation and organisational learningIt is evident that innovation and diffusionactivities are closely linked to learningprocesses (Lundvall 1992, Argyris1992). Lundvall argues that learning ispredominantly an interactive process,which is socially embedded and cannotbe understood without taking into ac-count the institutional and cultural con-text. The internal flow of informationand structure of learning processes in or-ganisations are important aspects of in-novations, as well as the inter-organisa-tional relationship. He furthermoreclaims that learning mainly takes placeinside organisations, and in connectionwith routine activities as production, dis-tribution and consumption, which allproduces information as input to the in-novation processes.

Argyris claims that learning in organ-isations or organisational learning is oc-curring under two conditions. Firstly,learning takes place when an organisa-tion achieves what is intended (single-loop learning). Secondly, learning oc-

TABLE 1. Technology policy options

Supply-side Bridges Demand side

Research, often collabora-tion

Infrastructure, e.g., telecom-munications

Technology capability incentives

Innovation policy, mission oriented

Standardization, to strengthen supply side

Demonstration projectsAdoption/innovation incen-tives

Industrial policy Policies for coupling supply and demand

Public Procurement

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curs when a mismatch between inten-tions and outcome is identified and iscorrected: that is when mismatch isturned into match (double loop learn-ing). Argyris emphasises that both typesof learning are essential, but “that manyorganisations, often without realising it,create systems of learning that suppressdouble-loop inquiry and make it verydifficult for even a well-designed infor-mation system to be effective” (Argyris,p 122-123). The consequences are thatsuch organisations have difficulty inlearning to correct those factors that in-hibit double-loop learning, e.g. organisa-tions with a pyramidal structure, havingspecialisation of work, unity of com-mand and centralization of power, andwith information flow following thestructure of power. Jönsson and Grönlund argue that single-loop learning is based on a causal rela-tionship between processes, and is oftenexperimental and associational, withoutquestioning the assumption under whichthe processes operate. In double-looplearning, the organisation will questionthe governing variables for these proc-esses when there is found a mismatch be-tween wanted and observed consequenc-

es. This type of learning is oftenstructural and conceptual, and is usuallyfound at higher levels in the organisation(Jönsson & Grönlund 1988).

An interesting question is whetherthese arguments can be applied at a re-gional level. Can we claim that double-loop learning is a necessary condition forindigenous development in a region, assingle-loop learning will just enhancethe skill to perform according to outsidedefined goals, and not develop capabili-ties for defining own goals or strategies?This issue is discussed in Section 6.

2.4. Measure learning effects in diffusion processes.Kraemer et al. (1989) have carried outextensive analysis of different modelsfor managing information systems in or-ganisations. They have identified threeloci of control over computing: IS man-agement, user department managementand top management. They also identi-fied three main orientations toward com-puter use that corresponds to these loci:technical advancement, operational ap-plications and managerial applications.By combining locus of control and inter-est served, we get this array of different

TABLE 2. State of Computing Managementa

a. They use the term computing change and computing management, which corresponds to changes in ITusage and IT management that is used in the rest of the paper.

Locus of managerial control

Type of interest IS management Departmental management Top management

Technical SKILL Service/skill mix Strategic/skill mix

Operational Skill/service mix SERVICE Strategic/service mix

Managerial Skill/strategic mix Service/strategic mix

STRATEGIC

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states (Kraemer et al. 1989, p. 30), seeTable 2.

In three of these combinations, Krae-mer et al. say that the level of managerialcontrol and the orientation toward useare congruent and coherent. The techni-cal state occurs when IS managementcontrols computing and computing is ap-plied to serve technical interest. Techni-cal innovation is seen as a primary bene-fit to the organisation. In the servicestate, departmental management con-trols computing and applies it in servingoperational interests in the various de-partments. In the strategic state, topmanagement controls computing and ap-plies it to serve managerial interests, di-rected toward applications that increaseorganisational efficiency and manage-ment control over financial and humanresources.

One of Kraemer et al.’s. main conclu-sion is that managerial actions are thedominant factor affecting outcome forcomputing use, and that it is becomingincreasingly important. They further-more detected a trend toward the strate-gic state, the control of information sys-tems by and for top managers and theirstrategic functions. Changes in comput-ing imply both types of learning process-es, but the mix of single and double looplearning will vary over time. They alsostate that “learning was usually incre-mental and cumulative,” but they alsoobserved “that learning processes wereinterrupted and the organisation’s com-puting trajectory was even reversed” (opcit., p 266).

From this we can conclude that atransition from one state to another willrequire double loop learning, as it re-quires an assessment of the goals andpremises for computing management.

Accordingly, identifying changes incomputing states may give insight inlearning processes in organisations.Kraemer et al.’s. taxonomy seems to of-fer an interesting framework for analys-ing how IT is used and managed, also ina regional perspective. We must thentake into account that their empiricaldata are collected from large governmen-tal organisations in urban areas, and thattheir conclusions cannot be applied with-out assessing the premises.

3. Research Issues The aim of this study is to examine theimpact of the diffusion and use of IT inrural areas in Norway. These specific is-sues are discussed:1. What are the important factors for

successful diffusion and use of IT inrural areas?

2. How can diffusion of IT contributeto indigenous or locally controlleddevelopment?

3. What role can regional (andnational) technology policies play insuch development processes?

This research approach implies both the-oretical and methodological challenges,as it involves different levels and per-spectives. Firstly, we have the innovationand diffusion processes in the individualorganisations, including changes in workprocesses, organisational structures andmanagement. Secondly, we have the in-stitutional, social and cultural structuresof a region, that influence the diffusionof IT into the local and regional econo-my, and functioning of the economic ac-tivities in general. Such factors do great-ly influence the interaction between the

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local and national economies, as changesin the internal social and cultural pat-terns.

Thirdly, we have to consider the na-tional level, which comprises the techno-logical and economic structures as wellas the goals and strategies that define thenational technology policies. These sys-tems and the interactions between themprovide a framework for technologicalchange, often denoted as the nationalsystem of innovations, in which the re-gional institutions and organisationshave to adapt themselves (Lundvall1992).

Even if we cannot overlook factors atall levels, this paper will mainly focus atthe regional level, in analysing how dif-ferent initiatives and efforts have causedeffects on the local economies and on theregion as such.

A preliminary analysis of the IT pro-gramme indicates that only few projectshave succeeded to accomplish the inno-vations that were planned (Jansen 1993).Other studies of regional technologyprogrammes report similar difficulties incarrying out successful innovations inrural economies (e.g. Hetland 1991,Qvortrup 1994). We accordingly wouldlike to study the following assumptions:1. The IT programme did not manage

to stimulate innovative activities inthe organisations, due to that theinformation flow and knowledgeexchange were not organised in anappropriate way.

2. The IT programme had little effecton the region, due to lack of strategicorientation of IT innovations in thecompanies.

3. The regional IT-policy did notaccount for the specific characteris-

tics of the region and in the variouslocal communities.

3.1. Research methodologyThe approach applied here is based onqualitative analysis of a number of theprojects that have been initiated by the ITprogramme. The empirical part of thisstudy consists of two parts:a. An analysis of the effects of an IT

programme in Finnmark runningfrom 1989-93. The effects have beenassessed according to the resultsachieved in the organisationsinvolved. The regional impacts areestimated through aggregating theeffects of the individual projects onthe local economy.

These data have been collected throughstudying available documents and re-ports from the different projects. Anumber interviews with informants havebeen carried out, either by personal visitsor through telephone. In addition, a ques-tionnaire has been sent to the remainingorganisations involved.b. The second part consists of a minor

study of present use of IT in differentsectors of the regional economy.

These data have collected through stu-dent projects, where we have selected anumber of branches in the economy,mainly in the service sector. The studentshave carried out semistructured inter-views in about 80 enterprises, which aredocumented in student reports.

In a report to the Finnmark Countyadministration, this research approachand the empirical findings are discussedin more details (Jansen 1995).

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4. A Case Study: Policy-Initiated Diffusion of IT in Finnmark Finnmark, the northernmost region inNorway, has a very scattered populationand great distances. Characteristic fea-tures of the region’s economy are: • small local markets and long dis-

tance to national and internationalmarkets

• small labour markets, low compe-tence and difficulty in recruitingskilled workers

• easy access to rich natural resources,in particular fish. But the economicstructures and trade regulations havefavoured export of raw material.

These factors have created a one-sidedand a vulnerable industrial structure,dominated by the fishing industry andsome mining companies. Many smallcommunities along the coast are com-pletely dependent of one or two fish-pro-ducing plants, and in addition on privateand public service organisations. Theeconomy may be illustrated by some fig-ures, see Table 3.

The share of the population havinghigher education in this region is lower

than in the rest of Norway, and there arefewer opportunities for educated women(St.mld 32:89-90). Studies carried outhave shown that the use of new technol-ogy in Finnmark has been lagging be-hind other parts of Norway (Buflod1987, Fredeng 1989). The number of IT-companies is still small (ITF 1993).

4.1. An IT programme in Finnmark Various efforts have been introduced bythe government to stimulate economicand technological development of the re-gion.5 A large project was initiated bythe Norwegian Telecom in 1987. Anoth-er effort was the IT programme, runningfrom 1989 to 93 and managed byFinnmark County administration.6 Be-low follows a brief description of themain parts of these efforts, see (Jansen1995).

Infrastructure and telematic7 service developmentOne of the basic ideas in the programmehas been to use telecommunications as abasic element in a diffusion strategy.This strategy consisted of three mainparts: a. Establishment of computer network

TABLE 3. Employment and gross product in Finnmark and Norway, excl. oil. 1992 in percentages.

Employment Gross product

Finnmark Norway Finnmark Norway

Agriculture and fishing 8 6 13 5

Manufacturing industries 14 16 20 24

Energy, construction & transport 18 17 27 28

Trade, hotels, businessserv. 19 26 13 17

Public & private services 41 35 27 26

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between regional research centers inFinnmark and the rest of the country(FUNN). The goals were to improvecommunication and cooperationbetween research communities, tostrengthen the local competence, andto create a basis for commercialbusiness operations, as part of a gen-eral policy for regional development.These goals proved to be partly con-flicting within the short time horizonthat was given for the plan to provesuccessful. Very few centers wereable to provide profitable informa-tion services (Hetland 1989). Oneimportant reason has been the lackof support from local authorities, andthat there was little demand locallyfor the services being offered.

b. Supporting the development of 10telematic centers, which provide to-way video communication services.These services have been importantfor the implementation of other partsof the programme. However, manyof the centers have experienced eco-nomic problems, in particular due tochanges in charging policy of theNorwegian Telecom.

c. Development of user applications, astelemedicine, videoconferencing anddistance teaching. Telemedicinemeans the application of IT in theprovision of health service activities,such that resources outside a localorganisation can be used in serviceprovision. This implies that e.g. citi-zens in small communities are pro-vided better medical serviceswithout having to travel to centralhospitals. This development hasimplied challenges at both technical,functional and organisational levels,

requiring competence buildup andcooperation between different usergroup. This project has includedboth supply-side activities as devel-opment of new services, infrastruc-ture buildup and demand-side effortsin stimulating the use of such serv-ices. Telemedicine is an example ofa social experiment that has gainedinternational attention (Qvortrup1994).

Support to telecottages and other IT-service providersThe goal was to establish 5 CommunityTeleservice Centers (CTCs) inFinnmark. A CTC is a multipurpose cen-tre aimed at providing computer and tel-ecommunication facilities for local com-munities in remote, rural regions,offering some computer training classesand support for low-skill service provi-sion (Qvortrup 1993).8 To day, only oneof the CTCs in Finnmark is in operation,located in Guovdageaidnu, a major Lap-pish settlement. The main activity is re-lated to the development of a Lappish ITdictionary, and to provide translationservices. This idea should have potentialfor commercial success, but so far, theCTC has not become profitable.

The programme has also supportedother firms offering distance work basedon the use of PC and telecommunica-tions, but none of them has survived. Thepolicy has primarily been to support thecreation of new businesses and services,and little efforts have been done for inte-grating these firms into the local econo-my.

These experiences illustrate a typicalproblem for small, service-providingfirms in rural areas. They are facingsmall, low-competent local market, they

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have long distances to larger markets,and they do often lack experiences ineconomic planning and business opera-tions. Hetland (1991) explains the diffi-culties in gaining entry into the remotework market in this way: “the morestandardized a service is, the more im-portant it is that the transaction cost islow, whereas the more unique a servicebeing provided is, the less effect suchcost exerts on its profitability”. The tele-cottage experience shows that when a ru-ral community tries to establish an enter-prise based on local competent person-nel, it demands an extensive degree ofnetworking over a long period to get ac-cepted in an outside market.

IT-investments and development of user competenceThe last element of the programme wasto support IT investments and imple-mentation of specific application sys-tems in a number of export-orientedcompanies, mainly fishing industries andhotels. The objectives have been to in-crease the quality and efficiency in infor-

mation handling and administrative rou-tines, and to improve service provisionand sales operation. Some of theseprojects are still running, and it may betoo early to evaluate them, as the full ef-fects have not been realised yet. In a pre-liminary report from the programmecommittee, it is stated that there havebeen few examples of organisationalchanges caused by these efforts, and thatmany companies lacked competence torealise the potentials created by the in-vestments. The report claims that the realneeds related to investments in IT werenot analysed systematically in manycompanies. Moreover, IT has not beenused to develop or strengthen their stra-tegic alliances (Christensen et al. 1993).

4.2. The impact of the programme on the development in the regionA more systematic way of describing thedifferent elements is obtained by apply-ing the schema presented in Table 1, asfollows in Table 4.

The table shows that most effortswere oriented toward the supply-side

TABLE 4. Overview of the effort, relate to different policy options

Policy options

Efforts Supply-side Bridges Demand side

Data- & telecom. Service develop-ment

Communication facilities

Telecenters/IS serv-ice providers

Service innova-tions, experiments

Telecommunication services

Demonstrations

IT-investments Support to procure-ment and IS imple-mentation

Telemedicine Development of methods and tools

Communication facilitiesCooperation effort

Knowledge build-up, support to users

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and the infrastructure building. The pro-gramme lacked in general initiatives thatwould stimulate the demand for the serv-ices being developed. Only the telemed-icine project has virtually been both sup-ply- and demand-oriented, as this projectincluded the introduction of new appli-cations, and also supported the use of thecorresponding services. This has notbeen the case for the videoconference fa-cilities. The demand for such serviceshas been low, and to day only thosetelematic centers supporting telemedi-cine are in daily operation.

The various initiatives should be an-alysed along three different dimensions:• The establishing technical facilities,

made up by the basic infrastructuredevelopment and IT investment inindividual enterprises. These effortshave, as a whole, been successful astechnical solutions, as nearly all sys-tems have been implemented accord-ing to the plans, except the tele-cottages (Fredeng 1991). The activi-ties have involved development ofskill and practical experience. It isassumed that innovations in these ar-eas require mainly single-loop learn-ing, as they mainly imply improvingtechnical achievement, within well-defined goals. We find mainly thatthe technical skill has been im-proved, where the control is usuallyfound among the IT staff in the or-ganisations, corresponding to Krae-mer et al’s. IS management (see Ta-ble 2).

• The development of functional andoperational services, which in-cludes the build up of telematic cent-ers and telecottages and develop-ment of the support functions and

providing user services. Here wefind greater differences in the degreeof success. Some of these effortshave been carried out as planned, butthe use of the services has not beenas expected. In other cases, the qual-ity of the services has not been satis-factory. Many of these cases seem tofit into the skill/service mixed state:user interest should be served, butthe control of IS management residesin the technical departments. Wefind that mainly single-loop learn-ing have taken place. This does notcreate the knowledge and compe-tence needed for changing the con-trol structures and management atti-tudes that make innovations difficultto accomplish (Jønsson&Grønlund,op cit.).

• The organisational and managementfactors that are necessary for inte-grating the infrastructure and servic-es into the local production system.This includes development ofknowledge and adapting the organi-sation for using the new services,too. The empirical data describe fewcases of organisational changes orcases where the strategic usage of ITis reported. These findings indicatethat IT has not served the interest ofor have been controlled by the topmanagement. It is evident that dou-ble-loop learning is required to ac-complish this type of innovations, asthey imply fundamental changes inmanagement activities.

We can group the different efforts intofive categories, and estimate theirachievement along the three dimensionsdescribed above. The estimated valuesare given by the author, based on person-

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al interviews or on written reports fromthe projects. The values given are aver-age scores for each group, which mayvary considerably within each group.The values for the regional impact arebased on estimated scores on a numberof indicators.9 See Table 5.

The table show that while the devel-opment of technical and operationalservices on average has been fairly suc-cessful, as it is reported improved effec-tiveness and quality of service provisionin a number of the companies that havebeen supported. However, the strategicorientation of the efforts was in generallacking. These findings indicate that thecapabilities for double-loop learning andto accomplish organisational changeshave been lacking in many of the organ-isations. They furthermore indicate thatthe programme primarily has causedchanges within the individual organisa-tions, as we have found very few inter-organisational relations being created.The impact on the local and regionaleconomy has been very limited. Themain exception is the telemedicineproject, which has stimulated collabora-tion and mutual competence build up be-tween the involved parties, as general

practising doctors, remote medical spe-cialist, IT specialist and other physi-cians, and in this way caused organisa-tional changes.

This effect has been intended, result-ing from a deliberate strategy for thetelemedicine project. In most otherprojects, such strategic links to the usershave been lacking. This was particularlythe case for the CTCs and informationservice providing enterprises, as well forthe general buildup of the telematic cent-ers. These findings seem to be in linewith Kraemer et al.’s conclusion, thatmanagerial actions are the dominant fac-tor affecting outcomes of IT-usage.

4.3. Conclusions - the effects of the IT policy effortsWe have found that the programme didnot succeed to initiate innovations inmany of the organisations involved. Onemain reason seems to be poorly organ-ised information and knowledge ex-change that are necessary to stimulatelearning processes. These findings seemto support, at least partly our first as-sumption. There are, however, importantexceptions, in particular the telemedi-

TABLE 5. The effects of the IT programme

Degree of achievement

Type of effort Technical skillOperational service

Strategic management

Regional impact

Telecottages poor poor lacking negligible

New IT services poor/fair poor/fair poor negligible

Video-conference good fair/good poor small

IT-investments good fair/good poor/fair small

Telemedicine good good good significant

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cine project, and some IT-investmentsthat have been successful.

It seems furthermore reasonable toconclude that the programs have had lit-tle effect on the development in the re-gion, as postulated in assumption 2. Theprogramme has not stimulated the de-mand for the services that have been cre-ated. One explanation may be that theprogramme was not able to establishingcouplings between service providers andtheir customers, such that they could in-teract and influence innovations andlearning processes. One find few cases oflocal or regional, horizontal networks re-sulting from these efforts. The pro-gramme has strengthened the ties to cen-trally controlled networks (vertical inte-gration) in some of the businesses, whichalso have negative effects. Even suchcouplings may stimulate technology dif-fusion, they tend to prevent access to im-portant information and do not allow formutual exchange of knowledge, which isa to achieve double-loop learning.

Another important point is that veryfew women were involved in the variousinitiatives. The programme did not focuson the particular consequences of tech-nology diffusion for women, even thatone know that lack of work places forwomen are a serious and increasingproblem for many small communities.Furthermore, we find that the IT pro-gramme in very few cases only did takeinto account the specific characteristicsof the region. This is discussed in section6.

5. User-Driven Technology Diffusion in a Rural ContextThe other trajectory for diffusion of IT isclosely linked to the economic develop-ment and changes in the production lifein the region in general. Technology dif-fusion into rural areas takes often one ofthese three forms (Arbo & Gulowsen1992, Storgaard 1993):• Consumer-driven transfer of tech-

nology, mainly because most peoplecan afford to buy advanced equip-ment, as TV/video, PC’s and otheradvanced electronic facilities.

• Through organisational transforma-tions, in that enterprises changework routines and through interre-gional collaboration, or have adaptedthemselves to higher technical stand-ards, e.g. as (sub)providers.

• Technology transfer that is mediatedby larger corporations, in particularin the utilisation of raw materials infishing industry, in service provision,communication, etc.

Some small scale investigations of theactual IT usage in Finnmark has beencarried out during 1992-1995 (Jansen1995). These data, which are collectedfrom a limited number of enterprises andbranches, may not provide a completepicture of the current situation. We do,however, believe that they give an ade-quate description of IT usage in rural ar-eas in Norway to day. Our findings are: • In most branches of the service sec-

tor, the local technical solutions arecomparable to elsewhere in Norway.But some sectors, in particular in-dustrial production, are lagging.

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• Public and private services havebeen substantially improved duringthe last 10-15 years.

• Modern telecommunications haveprovided easy access to informationand knowledge outside the region,and provides better tools for cooper-ation and knowledge exchange

• The skill development shows ambig-uous trends. In e.g. banks and insur-ance companies, the qualification re-quirements have in general been en-hanced. In retail trade, however, thejob content for most lower-level em-ployees has been reduced, which re-sembles a fordist pattern. This ap-plies in particular for work placestypical for women.

• Most enterprises are linked to com-puter networks operated from out-side. This opens for external controland increased local vulnerability bydepending on remote informationsystems (vertical integration). Tele-communication services have notstimulated cooperation through hori-zontal networks between local enter-prises.

• Most computer systems in use aredeveloped and maintained outsidethe region. This may create depend-ency of external expertise, and ham-per competence build up locally.

• Many local offices (or branches) aremainly importing IT-services intothe region through the networks, andfew are buying these services local-ly.

• The use of networks has increasedspecialisation and division of labourin some sectors (e.g. in retail trade,manufacturing industry), which may

imply that the region’s share of thevalue-adding chains has been re-duced.

• Rationalisation, partly caused by in-creased IT-usage has implied staffreduction, which have severe effectson small communities. We find thatthe diffusion of new technology hascreated few new IT-based jobs in theregion.

We find, typically, all three forms of dif-fusion as described above. But the thirdform, mediated by larger corporationseems to be the most influential one.This is the case both in many branches inprivate sector, and even more typical inthe public sector, where the local officesare equipped by IT-equipment accordingto central strategies.

These conclusions are in line withother findings. In a study of the develop-ments in retail trade in European coun-tries, it is claimed that “..the organisa-tional changes lead to more inter-dependence within the trade sector. Oneconsequence is an increased organisa-tional flexibility, with the risk of deterio-ration of worker condition, and their jobshave become standardised” (Vendraminand Valenduc 1993). Furthermore,Gillespie and Goddard (1989) states“…improved communication and bettertrade relations with fewer barriers pro-vide a better competitive climate forstronger rather than weaker economies.For the districts that have a weak econo-my, greater openness will only rendertheir weakness more obvious. In thisnegative scenario, the main applicationsof communication services are as deliv-ery mechanisms for externally-producedgoods and services, so that the regionconcerned will have little roles to play in

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shaping the infrastructure or the servicesrun over it, because it is designed prima-rily to serve the interest of external or-ganisations.”

It may also be relevant to look at thediffusion of other technologies, e.g., intransportation and communication. Wefind that there have been radical changesin the use of advanced technology in theregion during the last 15-20 years, illus-trated by some other observations(Jansen 1993):• The development of air traffic has

been substantial, as Finnmark hasthree larger and eight smaller air-ports. This is impressive in a regionwith less than 80 000 inhabitants.

• The use of mobile telephone, TV andother communication systems, bothat land and offshore can be com-pared to an average national level.

However, in spite of this substantial in-crease in the use of new technical arti-facts in the region, we do not find corre-sponding development of localmanufacturing industries or supportservices (Arbo & Gulowsen 1992). Ac-cordingly, the economic, social and cul-tural integration of new technology at theconsumer side has not implied a similardevelopment at the producer side (exceptthe development of maintenance servic-es for cars and snowmobiles). It seems tobe a mismatch between the changes inthe customers demand and the innova-tion processes at the supply side in thelocal economy.

Our findings indicate that the learn-ing effects of the technology diffusionhave been small. One reason may be thestructure of the local economy itself: theavailability of capital, machinery andknowledge is insufficient to stimulate the

type of innovations that is required. Canwe find strategies that counteract suchthis type of development?

6. How Can Technology Diffusion Support Indigenous Development?It seems to be a paradox that while thegeneral development of the regionaleconomy has implied a significant user-driven diffusion of technology, the ITprogramme, with some exceptions, hasnot succeeded in creating services thatcan meet local demand. This may indi-cate that the underlying technology poli-cy did not rest on an adequate under-standing of the real mechanisms in thelocal economies. It is necessary to lookcloser into the innovation and diffusionprocesses, to understand the factors thatinhibit such developments.

6.1. The Producer - User relationIn a market economy, characterised by ahighly developed division of labor, prod-uct innovation raises an informationproblem between the users and produc-ers. If markets were pure, and character-ised by an anonymous relationship be-tween users and producers, thisinformation problem is difficult to solve.Innovative activities aiming at new prod-ucts would be very risky to initiate, andsuccessful innovation would be very dif-ficult to achieve. Williamson points tovertical integration as a solution to thisinformation problem, but he has later re-vised his original analysis of markets andhierarchies, and accepted alternativeforms of governance, e.g. the network(Williamson 1985). Lundvall presents anintermediate institutional setup that char-acterises the relationship between users

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and producers of product innovations,called organised markets. The most fun-damental aspect of the organised marketis the ongoing process of exchange of in-formation between users and producers,involving a process of change in knowl-edge and enhancing the innovative capa-bility of the producer and the user com-petence. This user-producer approachimplies an emphasis on innovation as aninteractive learning process (Lundvall1992).

Interactive learning involves, accord-ing to Lundvall, both technical, commu-nicative and social learning. While thetechnical learning focuses on awareness,understanding and developing a know-how among the users, the communica-tive emphasise the mutual discourse be-tween users and producers. The sociallearning implies understanding of socialas well as economic needs for the otherparty and developing common rules re-stricting egoistic behavior.

Lundvall furthermore defines fourdifferent dimensions of space in the user-producer relationship: Economic space,which relates to how different economicactivities are located in a system of pro-duction where the vertical division of la-bor is highly developed. Organisationalspace refers to horizontal and vertical in-tegration. The geographical space canbe measured in terms of distance, whenactivities can be assigned to distinct lo-cations. Lastly, the cultural space is amore loose and complex concept, but itrelates to important characteristics in thereal life, having great impact on e.g.learning and communication processes.

6.2. Winning back the control of information as a strategy for indigenous development?Our study shows that the economy inFinnmark, as in most rural areas, can becharacterised by outside controlled, ver-tical integration, and few cases of hori-zontal networks. The geographical dis-tance to the outside markets is large.There are also significant cultural differ-ences between the region and the mar-kets, and between the local authoritiesand central, government agencies.

These factors clearly imply that com-municative and social learning based oninteraction between users and producershave been difficult to achieve in the re-gion. Vertical, outside operated networkscreate barriers for information flow intothe region, and by that inhibit knowledgebuildup in the region. E.g. the interactionbetween local information services pro-viders and the customers in a remotemarket is low. We need, accordingly, astrategy that can change the structuresthat control the information flow and bythat the knowledge buildup.

Krogh (1993) has developed a modelthat may help to understand these proc-esses. His basic assumption is that infor-mation is an input factor in all productionprocesses, corresponding to physical re-sources. The main point is that informa-tion work is not a separate activity, but anintegrated part of the value adding sys-tem. A figure may illustrate this, see Fig-ure 1.

The information work in the produc-tion processes has, however, three im-portant characteristics:• Every step in the production process-

es creates data that can be convertedto knowledge.

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• The information handling processesare directed toward all links in thevalue-adding activity, starting withthe catching of natural resources,and ends up with marked and salesoperations.

• These processes may take place atlarge distances from the physicalprocesses.

The value adding chain in the fishing in-dustry can illustrate this model. Data arecollected in all processes: fishing, pro-duction, distribution, marketing and thenegotiations with the customers. Thesedata form basis for the development ofnew knowledge and competence. Whena local fish factory belongs to a centrallylocated corporation, majors part of theseoperations is carried out outside the re-gion, and important information as cus-tomer’s requirement and changes at themarketplace, will not be available local-ly. This will prevent the local actors todevelop knowledge and competence inthese areas.

The challenge for the local economyis to get access to the data sources in allparts of the value chain. One way is tostimulate horizontal cooperation, suchthat more information flows internally in

the region. We know, furthermore, thatdirect contacts with the different actorsin the market are essential for local serv-ice providers. Hepworth emphasises thatit is a major question for rural develop-ment policy to discover ways of helpingsmall-scale operations to connect intothe information economy. Rather thancontinuing a dependency form of devel-opment associated with branch-planteconomies, there is a need for a strategythat would result in greater regional au-tonomy, based on creating a networkingculture between small and medium-sizedenterprises in remote areas, such that lo-cally based service offerings can stimu-late indigenous development (Hepworth1989). This implies that both the localand the regional market have an impor-tant role to play in this development.

Katz (1988) has analysed IT as aforce shaping society in three differentphases: “The first stage of statebuilding,IT is mainly used by the apparatus. Thusthe political variable has more weightthan the economic variable in determin-ing their diffusion. In the second phase,which we might call infrastructure build-ing for economic development, commu-nications development is driven by eco-nomic needs, mediated by the political

FIGURE 1. A model of value added chains in resource based production systems

Flow of data

Resource Raw material

Data Information Knowledge Action

Product Market

Actions

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system. In the third phase - that of matu-rity - the manufacturing and service sec-tors become the main contributors to theexpansion of information and communi-cation systems. In this phase, the eco-nomic variable is the one that has moreweight.”

This is a unilinear model, taking IT asmore or less independent variable. Themodel cannot be applied on Norwegianrural areas without modifications, as weare more likely to see the different phas-es developing in parallel. But it may pro-vide an interesting perspective to theanalysis of the diffusion processes. Inour cases as described here, we mightclaim that the policy initiated efforts be-longs to phase 2, while the user driven ITdiffusion resembles what Katz denotesas phase 3 events. However, these twotypes of developments have actually tak-en place simultaneously. However, thisperspective did not influence the plan-ning and implementation of the policyefforts.

These findings indicate that the pro-gramme did not take into account thespecific strengths and weaknesses in thisregion, other than those generally foundin rural areas in Norway. The programmedid not manage to stimulate innovationprocesses that could benefit from thestrength of the regional economy, or ac-tions that could counteract its weakness-es.This finding supports our third as-sumption.

7. ConclusionThis study has revealed some fundamen-tal problems in defining and implement-ing regional IT policies. We found thatthe IT programme carried out in

Finnmark had some successful projects,which have initiated innovations andcreated new services. But the generalconclusion is that the programme has notcontributed significantly to the develop-ment of the region. It has not counteract-ed the general trajectory of change in theeconomy, dominated by vertical integra-tion into centrally dominated networksand organisations. Small efforts havebeen done to stimulate the developmentof horizontal networks between smalland medium-sized enterprises in the re-gion. Thus the local synergy effects andknowledge development have been lim-ited.

The programme had few resources,which were fragmented into many smallprojects. The time horizon for manyprojects was too short to give any sub-stantial effect, and there were no plansfor transfer of experience and knowledgegained from the different projects. It waslittle focus on the interaction betweentechnology and organisational, socialand cultural factors, as e.g. women’s re-lation to technology was not an issue atall. The plan failed in stimulating the lo-cal market for new IT-services, and thepublic sector as customers were not inte-grated in the programme.

These conclusions do not necessarilyimply that the programme has been wast-ed efforts. Many of the basic investmentsand the experiences gained can provebeneficial if one continues infrastructurebuildup, and include to support users ofthese new services that are created.

However, a new IT-strategy is re-quired, that is based on a more adequateunderstanding of the technology diffu-sion processes that are actually going onin this region. Furthermore, this strategyshould be an integral part of a long term,

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holistic development policy for the re-gion, including elements as the follow-ing: • To stimulate integration between the

service providers and users locally,and even support cooperation amongthe users of new technology in theregion. One should include localpublic institutions (e.g. municipali-ties) as part of local market for IT-services.

• To develop horizontal networks be-tween the industry, educational andR&D-institutions from all parts ofthe region that can contribute toknowledge buildup and innovations.It should be allocated resources tothe transfer of experience andknowledge between the various ac-tors.

• To stimulate the development of in-formation services that are based onthe regions own industry or rooted inlocal competence and cultural tradi-tions.

Is this a realistic strategy? A OECD re-port claims that there are some signs of apositive development: “A new, ‘post-Fordist’ or indigenous forms of develop-ment are emerging, and these appear tooffer more scope for creating a greaterdegree of internal coherence in the re-gional economy. The indication for thisform of development is a decline in thevertically-integrated corporate structureson one hand, and, on the other hand thedevelopment of spatially proximate net-works of firms that may provide the basisfor a renaissance of regionally-focusedproduction systems” (OECD 1991)

In Norway too, we may find such ex-amples, as e.g. in the furniture industry,which is a successful export-oriented

business sector in Norway. A majority ofthe enterprises are found in a small, re-mote region at the west coast (Møre andRomsdal), and they have establishedhorizontal networks and locally basedcooperation patterns. These experiencesshould be studied carefully.

We now experience a significant op-timism in the north related to an increasein the fish resources and a stronger localeconomy. The increased cooperationwith Russia offers great challenges. Re-search should be allocated to followthese developments carefully, aiming atstudy how the exploiting of the resourcesin regions can be managed by the regionitself, and not be dominated by outsideinterests. Much effort should be aimed atinvestigating the conditions for strength-ening the horizontal cooperation and de-velopment of local innovative networks.

Notes1Both the 1985 White paper on regional Policy (St.mld no 67:1984-85) and Long Term Programmefor the Regional Development Fund St. mld4:1984-85) stress competence enhancementthrough the increased use of IT. The National ITProgramme, initiated in 1987 (St. mld 1:1987-88)included a separate part aimed at regional diffusionof IT.2The plan for these efforts in Finnmark is describedin Forut, (1986), as part of Norwegian Telecom’sStrategy3This study is part of “The Rural Development Pro-gramme”, running from 1991-1994 and funded byNorwegian Research Council.4Infrastructure may have (at least) two differentmeanings:

i Tele- and datacommunication facilities andsupport services, aiming at providing com-munication and infor-mation services span-ning physical distances (analogous to roadand railway systems), in a more restrictedmeaning.

ii Those parts of IT systems in organisations

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that do not belong to any specific user groupsor applications, but rather are providing acommon set of facilities and services acrossthe organisation, as basis for all IT systemsand applications. (a broad definition, cf Gun-ton 1992)

5A short description of these efforts is given in theyearly reports from Telecom Research Center (TF1988, TF 1989), to be retrieved from NorwegianTelecom Research Development, Kjeller, Norway.6Its main goal was initialey defined as: To establishprofitable and sustainable IT applications withinprioritised areas, which in 1992 was changed tobe: ..contribute to increase the application of IT asa vehicle for the reorganisation and development ofthe business sector in Finnmark. The programmeinitiated about 40 projects, adding up to total 5.7NOK. The description given here includes alsoother centrally managed efforts that were aimed atthis region, and should be seen as extensions of theregional programme, as e.g. infrastructure invest-ments, the telemedicine and the FUNN projects.7Telematics is being used as a common term for IT-based communication and information exchange,including multi-media communications8The support to CTCs in Finnmark was part of anationalwide programme for development ofsmall, IT-based service providing centers in ruralareas. These efforts have in general not been suc-cessfull, and to day only one or two of them are stillin action. See Hetland (1989) for more detaileddescription.9The indicators used here are 1)improved serviceprovision to citizens, 2) creation of new jobs, 3)increased import or increase export of services 4)strengthening of veretical integration 5) develop-ment of horizontal network. These indicators corre-spond partly to 8 cohesion factors as defined in TheEU ACCORDE project. A more detailed discus-sion is given Jansen (1995).

AcknowledgementsThis work is part of the ‘Rural Develop-ment Programme’, which was funded bythe Norwegian Research Council.

I am grateful to my supervisor PålSørgaard and my collegue Per Hetlandfor very fruitful discussions. I alsothanks the anonymous reviewers thathave provided valuable comments todrafts of this paper.

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