Knowledge - The Heart and Mind of Economic Development
The Definition of the Knowledge Economy
- [Wikipedia]: The knowledge economy is the use of knowledge technologies (such as knowledge engineering and knowledge management) to produce economic benefits as well as job creation.
The global economy is in transition to a "knowledge economy," as an extension of an "information society." The transition requires that the rules and practices that determined success in the industrial economy need rewriting in an interconnected, globalized economy where knowledge resources such as know-how and expertise are as critical as other economic resources. These rules need to be rewritten at the levels of firms and industries in terms of knowledge management and at the level of public policy as knowledge policy or knowledge-related policy.
- [Investopedia]: A system of consumption and production that is based on intellectual capital. The knowledge economy commonly makes up a large share of all economic activity in developed countries. In a knowledge economy, a significant part of a company's value may consist of intangible assets, such as the value of its workers' knowledge (intellectual capital). However, generally accepted accounting principles do not allow companies to include these assets on balance sheets.
Lesser-developed countries tend to have agriculture or agriculture and manufacturing-based economies, while developing countries tend to have manufacturing or manufacturing and service-based economies, and developed countries tend to have service-based economies.
Most countries' economies will consist of each of these three major categories of economic activity, but in differing proportions relative to the wealth of that country. Examples of knowledge economy activities include research, technical support and consulting.
The Four Pillars of the Knowledge Economy
[The World Bank]: The Knowledge - the heart and mind of economic development. The following pillars are four critical requisites for a country to be able to fully participate in the knowledge economy:
- Education & Training: An educated and skilled population is needed to create, share and use knowledge.
- Information Infrastructure: A dynamic information infrastructure-ranging from radio to the internet-is required to facilitate the effective communication, dissemination and processing of information.
- Economic Incentive & Institutional Regime: A regulatory and economic environment that enables the free flow of knowledge, supports investment in Information and Communications Technology (ICT), and encourages entrepreneurship is central to the knowledge economy.
- Innovation Systems: A network of research centers, universities, think tanks, private enterprises and community groups is necessary to tap into the growing stock of global knowledge, assimilate and adapt it to local needs, and create new knowledge.