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Knowledge – this term, according to the knowledge management, comprises practise, strategy, method and approach. In one word, this is “how” to do something. Knowledge (or in other words know-how) is contextual and ranges in form codified or codifiable (explicit knowledge) to experiential (tacit knowledge) Knowledge is needed to understand business decision- making, growth and achievement of long- term vision of the organization.

Forms of knowledge

  • Tacit knowledge - used every day by people, but difficult to capture in a formal record, its substance can not be expressed with words;
  • Implicit knowledge - which can be systematized and presented using words, numbers, signs or symbols, and thus transferable
  • experiential,
  • internal,
  • external;
  • industry,
  • web- based,
  • new knowledge;

Economics of knowledge

According to the economics of knowledge, it is a positive externality. Knowledge comes from education and research. To understand the economics of knowledge, it is important to distinguish private and social benefits.

This is a benefit which consumer of good or service receives. Marginal benefit comes form an additional unit of a good or service. That leads to marginal private benefit (MB), which is a benefit form an additional unit of a good or service that that the consumer of this good of service receives.

Moreover, there is an external benefit from a good or service. This is the benefit that someone other than the consumer of a good or service receives. Like in private benefits, there is also a marginal external benefit, which is form an additional unit of a good or service that people other than the consumer enjoy.

What is more, there is also marginal social benefit (MSB), which refers to marginal benefit enjoyed by society (consumer of a good or service – marginal private benefit) plus the marginal benefit enjoyed by others (the marginal external benefit).

All of that is boiled down to following equation:

MSB= MB + Marginal external benefit

See also:


Author: Karolina Golańska