Introduction  (Page 8/20)

Recent years have seen the greater recognition and discussion of the importance of knowledge due to reasons including disruptive technological advance and globalisation. The drivers of this new ‘knowledge economy’ have been summarised as (DTI 1999):

• Revolutionary changes in information and communications technology (ICT).
• More rapid scientific and technological advance.
• Competition becoming more global.
• Changes in income, tastes and lifestyle.

These drivers have combined to make the Knowledge the main factors in economic growth. Expansion in knowledge sectors is outpacing others to such an extent that more than 50% of the GDP of OECD countries are now knowledge-based (OECD 1996). This is highlighted by the United States, where even in the early part of the 20 ^th century, 85% economic growth was driven by technological advance (Quah 1999). Further weight is given to this by the changes in employment seen over recent years. Within the EU for example, employment growth in knowledge-based industries has been far stronger than the rest of the economy. This can be seen in the figures from EUROSTAT cited by the Work Foundation shown in [link] .

In [link] it can be clearly seen that many of the countries experiencing the greatest growth in knowledge-based industries are those developing from the weakest bases. These figures are projected against a period of economic change that saw recession in much of the Euro-zone during the early years of the 21 ^st century. This is apparent in the ‘other industries’ statistic in figure for Germany, which was particularly hard hit during this period.

Defining a knowledge economy

The role of knowledge in the Knowledge Economy is described in the definitions of the Knowledge Economy provided by the OECD (OECD 1996) and the UK DTI (DTI 2004):

“ …economies which are directly based on the production, distribution and use of knowledge and information ”

“ …one in which the generation and exploitation of knowledge has come to play the predominant part in the creation of wealth ”

While the above is useful in defining and understanding the origins of the Knowledge Economy, how can it be determined whether an economy is knowledge-based?

Methods such as the World Bank Knowledge Assessment Methodology (KAM) exist for benchmarking performance of countries in the transition to a knowledge-based economy. This builds upon the World Bank ‘Pillar Model’ of the Knowledge Economy, which describes the key supports of such an economy as being (World Bank 1998):

Human capital: educated and skilled workers

People; their knowledge, talents, ideas and graft form the fundamental pillar of the Knowledge Economy. Developing a successful regional Knowledge Economy depends upon creating and nurturing the skills, aspirations and motivations of the people therein and attracting talent from outside.