Nowadays, what is called the knowledge economy is progressively taking shape, that is, a modern economy based on increasing specialization, learning, innovation and characterized by rapid changes in technological knowledge. It is also a historical period where other than the capital and labor intensive economies, the global economy is in transition to a knowledge economy (Unger, 2019) meaning use of knowledge to generate tangible and intangible values. Knowledge economy is defined as production and services based on knowledge-intensive activities that contribute to an accelerated pace of technological and scientific advance as well as equally rapid obsolescence. The key components of a knowledge economy include a greater reliance on intellectual capabilities than on physical inputs or natural resources, combined with efforts to integrate improvements in every stage of the production process, from the R&D lab to the factory floor to the interface with customers (Powell et al. 2004).
Some scholars define it as a state of mind that operates at different levels. Economists Bengt-Åke Lundvall and Björn Johnson (1994), identify four dimensions:
- Know what: it concerns the knowledge of the "facts" that can be transmitted with the data and disseminated with the help of the databases;
- Know why: refers to the theoretical knowledge based on scientific and technological research and which allows innovation in production processes;
- Know how: it is linked to the individual and shared operational experience. It represents the human capital of the company and of the various social networks;
- Know who: identifies people with the necessary skills and problem-solving skills.
These are the key drivers of the knowledge economy: (Brinkley, Ian. 2008)
- Consumer demand: the composition of demand has shifted towards consumption of services and especially services generated by the knowledge-based industries.
- Technology: technology progress has created the global information networks that enable the knowledge economy to find their way into most aspects of the production process, reducing transaction and investment costs substantially.
- Globalization: opening up of markets and the internationalization of trade in knowledge sectors exposed to international competition; this led global labor markets for highly skilled workers, capital investment and access to new technology, information, ideas and knowledge flows from around the world have accelerated the transition to a knowledge economy.
Challenge for the companies
The first to talk about Knowledge economy was Peter Drucker (1993) announcing the entry into the new society of knowledge, in which the fundamental economic resource is no longer represented by capital, nor by natural resources or by labor, but from the knowledge and the subjects that generate it. According to Drucker, one of the most important challenges that every organization face is the ability to build systematic procedures to manage its transformation processes.
Therefore, the company must be able to leave the knowledge that has become obsolete and learn how to create it through:
- Continuous improvement of every activity;
- The development of new applications starting from their successes;
- An organizational process of continuous innovation.
The distinctive features found in this change that involves the entire economic system can be summarized as follows:
- An increase in the intangible capital stock in the stock of real capital;
- The expansion of knowledge-intensive industries;
- A growing importance of qualified emoloyment
- Brinkley, Ian. (2008) The Knowledge Economy: How Knowledge is Reshaping the Economic Life Nations.
- Drucker P. (1993). Post capitalist society, HarperCollins, New York
- Lundvall, B. Ä., & Johnson, B. (1994). The learning economy. Journal of industry studies, 1(2), 23-42.
- Powell, Walter & Snellman, Kaisa. (2004). The Knowledge Economy. Annual Review of Sociology. 30. 199-220.
- Unger R.M. (2019). The Knowledge Economy. OECD.
Author: Alex Chiesa