Detailed study on Knowledge Management Systems and Strategies.

Wednesday, 20 January 2010

What is Knowledge Economy

To start with any "why" we usually consider to define the term but here we are considering different approaches like :

1) K4D community -" Knowledge Economy is an economy that creates, disseminates and uses knowledge to enhance its growth and competitiveness."

2)Walter.W.Powell and Kaisa Snellman(2004) - "Production and Services based on knowledge-intensive activities that contribute to an accelerated pace of technical and Scientific advance, as well as rapid obsolescence.The key component of a knowledge economy is a greater reliance on intellectual capabilities than on physical inputs or natural resources.

Counter Argument - report of CERI Washington Forum, June 1999
"the science of describing, understanding, and measuring knowledge will always be an imperfect one".

Business Outlook - Michel Henry Bouchet - CERAM - International Workshop Seminar (2008)
"An economy whose growth momentum and competitive advantage are driven by dynamic investment in intellectual capital and innovative R & D, with deep structural, institutional and organizational implications."

Thus considering all these approaches we can surely say that there are two sides to every coin - some in support while some in against. To reach to any conclusion we need to know what exactly a knowledge economy does or how does it help or even does it create a problem.
Lets first start with the four main pillars of knowledge economy -
- World Bank Team (2006)
These four pillars carry the equal amount of responsibility and are therefore the roots of KE.
  1. Information Infrastructure deals with things like effective communication, information processing and spreading knowledge.(World Bank Team 2006)
  2. EIR (Economic and Institutional Regime) provides benefits in terms of finance for the creation and development of knowledge and also for Knowledge reuse.(World Bank Team 2006)
  3. Education being one of the most important since well educated and skilled people are the main sources for using and creating knowledge effectively.(World Bank Team 2006)
  4. Innovation consist in design, development and diffusion of a technology which is new to society concerned.(K4D community).
There is common misconception in some people that knowlege economy is just based on Hi-Tech or IT field but its not the case. This can be very well supported by some current examples given by development community such as:
  1. New techniques in farming can increase yields which leads agriculture contribute a lot to economic growth (eg - India).
  2. Use of information and logistical services has allowed traditional craft sector industry to bloom and achieve a new position.
  3. Most significant being application of environmental technologies and practices which is enabling Green Revolution to develop in developing countries.
Thus now I can surely say that knowledge economy is not only for hi-tech but its for each and every sector or also can make it more precise by saying that for each and every type of work that exists because either directly or indirectly every type of work surely make contribution to economic growth!!!

Moving further focussing on the negative aspect that Knowledge will always be an imperfect one as stated in the beginning is surely not wrong. Knowledge is after all research made by human beings who can perform mistakes so there is no 100% guarantee in all issues.

Taking this picture into account some people criticize and say that investment in knowledge has taken a major part while all other like machinery, equipments are losing their own importance which I personally agree too.

But taking the economic growth taken place due to knowledge can also be not neglected. The following points taken from the Development Community provides the required evidance for that :
  1. A research paper entitled "Knowledge and Development : A cross Section Approach" , co-authored by Derek H.C.Chen and Carl J.Dahlman examined a very broad range of knowledge related determinants of long-run economic growth and employing cross-section regressions that span 92 countries for the period 1960-2000.
  2. The authors found that the stock of human capital, domestic innovation and technological adaptation and level of information and communication technologies infrastructure all exert statistically significant effects on long-term economic growth.
  3. Human capital stock -> 20%increase -> 0.15%increase in avg economic growth.
  4. Innovation -> 20% increase in annual number of USPTO patents -> 3.8% increase in avg economic growth.
  5. ICT infrastructure (number of phones per 1000 persons) -> 20% increase ->0.11% increase in avg economic growth.
I personally feel that knowledge economy is the most priceless idea which should be put in practice by each and every country. I also agree to the fact that Knowledge Economy is not only Hi-Tech and the evidences in support are the economic growth of some developing countries like India and Egypt where major GDP contribution is made by agriculture and tourist respectively. Thus I completely agree with this fact that knowledge economy is meant for each and every sector/work as I mentioned earlier too.
Amongst the four pillars of knowledge economy I consider education and Information Infrastructure to be the most important. Taking education into focus I feel that well educated people are the main roots of knowledge economy.Lets imagine a place without any specialist or expert, the scenario will be just like a fish market. People will be imagining all sorts of weird things, believe in superstitions...having no knowledge of proper direction. Everyone will just wander here and there but will end up with nothing. So I strongly feel that education is the most important pillar of KE. Secondly Information Infrastructure ; communication between different people. Communication is one of the basic things required for the development of knowledge and proper economic contribution. There is a famous quote "two hands work faster than one" which is an obvious thing for knowledge too. Divison of labour is one of the smartest work which helps achieve targets easily. So its necessary for more than one person to get together and work towards a specific goal which can only be achieved by communication.
Lastly taking the contradictions into account I feel that knowledge has its own place. Each and every country needs to be well equipped in all ways. Machinery and Equipment for eg also deserve equal importance. So though knowledge economy concept is very much profitable but it does not suppress other necessities. Imagine what will happen if any country attacks the other?? At that time machinery and equipments will help a lot because creating, using and implementing knowledge is "TIME CONSUMING". It can not happen in fraction of seconds.So I am in favour with the concept of KE and its development but also I agree that it should be given that much importance that it deserves.

  1. Development Gateway --K4D community--available online at
  2. Walter Powell and Kaisa Snellman (2004)-- The knowledge Economy
  3. Islamic Development Bank-Jeddah(2006)--World Bank Team--The Knowledge Economy


  1. I think this article is very abstract, and the lack of (academic) Harvard referencing lets you down (this includes in-line citations and the reference section at the end). I think I understand your argument in the article, but the linkage is not non-existent. Generally this is good effort and expects to see better written articles in the next few months.

  2. Thnx Ravi, I understand about the referencing part but I am still not clear of whr I am going wrong in terms of content of this article..Means wht exactly I should do to improve it??

  3. hi, checkout my blog, on how to structure and to reference.