11 Facts About Knowledge economy

Knowledge economy is an economic system in which the production of goods and services is based principally on knowledge-intensive activities that contribute to advancement in technical and scientific innovation.

Knowledge economy is viewed as an additional input to labour and capital.

Knowledge economy emphasizes the importance of skills in a service economy, the third phase of economic development, called a post-industrial economy.

The term knowledge economy was made famous by Peter Drucker as the title of Chapter 12 in his book The Age of Discontinuity, that Drucker attributed to economist Fritz Machlup, originating in the idea of scientific management developed by Frederick Winslow Taylor.

Advancement of a knowledge-based economy occurred when global economies promote changes in material production, together with the creation of rich mechanisms of economic theories after the second world war that tend to integrate science, technology and the economy.

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Knowledge associated with intellectual information then is said to be a production factor in the new economy that is distinguished from the traditional production factors.

Harvard Business School Professor, Michael Porter, asserts that today's Knowledge economy is far more dynamic and that conventional notion of comparative advantages within a company has changed and is less relevant than the prevailing idea of competitive advantages which rests on "making more productive use of inputs, which requires continual innovation".

Knowledge economy provides the technical expertise, problem-solving, performance measurement and evaluation, and data management needed for the trans-boundary, interdisciplinary global scale of today's competition.

Worldwide examples of the knowledge economy taking place among many others include: Silicon Valley, United States; aerospace and automotive engineering in Munich, Germany; biotechnology in Hyderabad, India; electronics and digital media in Seoul, South Korea; petrochemical and energy industry in Brazil.

Yet, despite digital tools democratising access to knowledge, research shows that knowledge economy activities remain as concentrated as ever in traditional economic cores.

The Knowledge economy is incorporating the network economy, where the relatively localised knowledge is being shared among and across various networks for the benefit of the network members as a whole, to gain economies of scale in a wider, more open scale.