Date of this Version
Business Dictionary (2010) defines knowledge economy as:
“Economy based on creating, evaluating, and trading knowledge. In a knowledge economy, labour costs become progressively less important and traditional economic concepts such as scarcity resources and economics of scale cease to apply”.
World Bank (2008) document states regarding knowledge economy,
“For countries in the vanguard of the world economy, the balance between knowledge and resources has shifted so far towards the former that knowledge has become perhaps the most important factor determining the standard of living – more than land, than tools, than labour. Today’s most technically advanced economies are truly knowledge based.”
World Bank highlighted the four pillars for knowledge economy are
1. Economic and Institution management
2. Education and Skill
3. Information and Communication Infrastructure
4. Innovative System i.e. Research
The knowledge economy focused on the production and management of knowledge in the frame of economic constraints, or to a knowledge-based economy. In another meaning, it refers to the use of knowledge technologies to produce economic benefits. The essential difference is that in a knowledge economy, knowledge is a product, in knowledge-based economy, knowledge is a tool. In this way, brain attains a status of resource, ideas and thoughts are considered the products and the money so earned – konwledge money or economy (Wikipedia, 2010).
Drucker (1969) opines that unlike most resources that reduce when used, information and knowledge can be shared, and actually grow through application. Human capital — competencies — are a key component of value in a knowledge-based company. Communication is increasingly being seen as fundamental to knowledge flows. Social structures, cultural context and other factors influencing social relations are therefore of fundamental importance to knowledge economies. (p.263)
Developing countries differ from developed countries not only because they have less wealth and capital but because they have less knowledge. It is often costly to create and that is why much of it is created in industrial countries. United States dominates the world’s knowledge economy because 45 out of 50 regions with best knowledge base in the world are situated in the America. (Omar, 2003)