Knowledge Economy: An Overview

The dramatic development of information and communications technology, the increased speed of scientific and technological progress, and the increased global competition led to the growing importance of knowledge and technology for economy. Modern economy, therefore, increasingly includes features of knowledge economy, an economy based on production, distribution and use of knowledge. Also, more and more the growth of companies depends on innovation, and innovation is based on knowledge. This chapter presents an overview of knowledge economy. It describes the categorisation and a characteristic of knowledge, analyses features of knowledge assets, describes the reasons for the importance of information and communications technology for knowledge economy, and the economic aspects of knowledge assets. Finally, it describes the production, transmission and dissemination of knowledge, as well as the measurement of knowledge required for providing adequate economic indicators for the new economy. INTRODUCTION Influence of knowledge on economic activities has grown considerably in the last three centuries (Drucker, 1993). The first half of the eighteenth century brought the invention of technology, a combination of craft and skill with organised and systematic knowledge. The first encyclopaedia that contained a systematic descripThis chapter appears in the book, Knowledge and Business Process Management edited byVlatka Hlupic. Copyright © 2003, Idea Group Publishing. 701 E. Chocolate Avenue, Hershey PA 17033-1117, USA Tel: 717/533-8845; Fax 717/533-8661; URL-http://www.idea-group.com ITB8181 IDEA GROUP PUBLISHING Knowledge Economy: An Overview 17 Copyright Idea Grou p Inc. Copy right Idea Grou p Inc. Copy right Idea Grou p Inc. Copy right Idea Grou p Inc. tion of all crafts as well as the first technical schools appeared in the second half of the eighteenth century. These proceedings helped to convert craft into methodology and led to the industrial revolution that caused a radical transformation of society by the use of technology. In the last quarter of the nineteenth century, Frederick Taylor applied knowledge to the analysis and engineering of work. Taylor’s approach resulted in a rapid increase of productivity of about 3.5-4.5% per year, thus knowledge became an important economic resource. Also, as a result of decades of gradual increase of productivity, the standard of living in developed countries increased remarkably. One of the consequences was the increase in funding for education from about 2% of GNP to 10% or more. In the second half of the twentieth century, systematic application of knowledge in managing production and the service processes, as well as innovation, led to the development of the management function that became essential for further economic progress. An important role of management was to seek out what new knowledge is required to further increase economic output and how this knowledge can be made useful. In the last two decades, ideas, knowledge and technology became increasingly important to economy. One of the key reasons for this was a dramatic development of information and communications technology that provided a cheap facility for manipulating, storing, distributing and accessing information that led to the growing knowledge intensity of economic activities. Other reasons include increased speed of scientific and technological progress that led to accelerate growth of quantity of scientific and technological knowledge, as well as increased global competition fuelled by globalisation of trade and massive deregulation that led to reduced costs. The second section of this chapter describes the basic characteristics of knowledge economy and shows how economists treat knowledge in models of economic growth. The third section deals with categorisation of knowledge as well as with the specific characteristics that make it different from tangible goods. The fourth section deals with knowledge of intangible assets and reasons for their increasing significance in contemporary economy. Section five describes reasons for the importance of information and communications technology in knowledge economy, while section six describes the economic aspects of knowledge assets. The next section gives a brief discussion with several examples of knowledge management at a company level. The final section analyses production, transmission and dissemination of knowledge, as well as the measurement of knowledge required for providing adequate economic indicators for the new economy. 15 more pages are available in the full version of this document, which may be purchased using the "Add to Cart" button on the product's webpage: www.igi-global.com/chapter/knowledge-economyoverview/24834?camid=4v1 This title is available in InfoSci-Books, InfoSci-Business Technologies, Business, Administration, and Management, InfoSci-Business. Recommend this product to your librarian: www.igi-global.com/e-resources/libraryrecommendation/?id=1