Knowledge Economy

A knowledge economy refers to the economy in which the knowledge workers are the integral input element. The father of modern management, Peter F. Drucker, popularized the concept through his book, The Age of Discontinuity (1969).

This modern production practice is more visible in developed countries where a skilled workforce is a prime requisite for research activities, innovations, technological evolution, and scientific advancements. All these advancements and innovations contribute to production efficiency and create new opportunities.

• Knowledge economy exhibits the nation's intellectual capital, innovation clusters, and technology resources.
• The knowledge model prioritizes output creation most efficiently by utilizing scientific discoveries and innovations.
• The knowledge-based model's essential components are knowledge workers, information, innovation capability, intangibles like patents, copyrights, proprietary software, and knowledge processing.
• Both implicit and explicit knowledge is important. Skilled workers should possess relevant qualifications or certifications. In addition, they should have skills like technical, relational, and problem-solving.

Knowledge economy relies on knowledge or intellectual capital. A knowledge capital indicates the knowledge base of workers, information, technology infrastructure, etc. In addition, the new economic model produces intangibles like patents, copyrights, proprietary software, and knowledge processing. All these points to the importance of its source, education.

The main features of this new economy are education and skills, information and technology infrastructure, research, and the innovation system. The system values a skilled labor force, and skilled workers fill major job positions. Furthermore, investing in education and training develops skilled and competent workers capable of producing research and scientific knowledge.

Education and technological advancement played an important role in the transition of the agrarian economy to a knowledge economy in most countries. It changed the way people think, triggered innovation, changed the production practice, etc. In addition, the productivity of knowledge and skills helped many countries develop competitive advantage and compete internationally. When the agrarian model showcased the utilization of tangible assets and unskilled labor force, the knowledge-based one utilized intangible assets and a highly skilled labor force to create massive output more efficiently.

Knowledge creation, dissemination, and application boost economic growth. It also increases people's living standards by increasing the quantity and quality of output and supplying innovative products and services. For example, the United States saw substantial economic prosperity due to technical advancement. Although the United States exhibits the good implications of the knowledge approach, it is not yet a top knowledge economy country. The United States ranks top for aspects relevant to research, development, and innovation and lowest for education and technical readiness.

Knowledge economy examples are discernable from various Middle East regions. Many of the Middle East regions have been facing economic growth issues. Multiple factors contribute to it, like their over-dependence on oil resources and shortage of soft infrastructure. The leaders' solution to overcome this economic stagnation is to foster a knowledge-based economic model by creating, acquiring, distributing, and using knowledge.

The transition to a knowledge-based model was not easy for Middle East regions. They have to invest in the renovation of education systems, R&D and technological improvement, and efficient telecommunications as an initial step.

The UAE government has made building a knowledge system a key priority by streamlining more resources into infrastructure, creating a favorable environment for e-business and fintech industries, and introducing innovation clusters to attract worldwide entrepreneurs to incubate their ideas. One example of their initiative is Dubai's TechnoPark.

Knowledge-intensive activities are the main element in the knowledge-based economic model. Hence most of the characteristics are evolved in association with knowledge. The Journal of the Knowledge Economy is the first journal to examine the aspects of a knowledge-based model and highlight the knowledge evolution and associated impact. Some of the characteristics are the following:

• The prime input is intellectual capital.
• The system makes use of explicit and implicit knowledge.
• The main constituents are knowledge-based organizations, knowledge workers, and knowledge processes.
• Great emphasis on knowledge management through creation, storage, retrieving, and distribution activities.
• The new economy is not solely composed of service entities, and they also have high-tech manufacturing entities.
• High value for intellectual properties. 
• The Knowledge Economy Indicator (KEI) was the index that points to a region’s overall progress toward the Knowledge Economic model.
• The model thrives on generating evolutions and innovations.
• Skilled workers should possess relevant qualifications or certifications. Also, they have skills like technical, relational, and problem-solving.

This has been a guide to Knowledge Economy and its definition. Here we discuss how the knowledge economy works along with the characteristics and examples. You can learn more from the following articles -

• New Economy
• Commercialization
• Growth Industry