Knowledge Economy

The knowledge economy is a system of consumption and production that is based on intellectual capital. In particular, it refers to the ability to capitalize on scientific discoveries and applied research.

The knowledge economy represents a large share of the activity in most highly developed economies. In a knowledge economy, a significant component of value may consist of intangible assets such as the value of its workers' knowledge or intellectual property.

Developing economies tend to be heavily focused on agriculture and manufacturing, while highly developed countries have a larger share of service-related activities. This includes knowledge-based economic activities such as research, technical support, and consulting.

The knowledge economy is the marketplace for the production and sale of scientific and engineering discoveries. This knowledge can be commodified in the form of patents or other intellectual property protections. The producers of such information, such as scientific experts and research labs, are also considered part of the knowledge economy.

Thanks to globalization, the world economy has become more knowledge-based, bringing with it the best practices from each country's economy. Also, knowledge-based factors create an interconnected and global economy where human expertise and trade secrets are considered important economic resources.

However, it is important to note that generally accepted accounting principles (GAAP) do not allow companies to include these assets on their balance sheets.

The knowledge economy addresses how education and knowledge—that is, "human capital"— can serve as a productive asset or business product to be sold and exported to yield profits for individuals, businesses, and the economy.

This component of the economy relies greatly on intellectual capabilities instead of natural resources or physical contributions. In the knowledge economy, products, and services that are based on intellectual expertise advance technical and scientific fields, encouraging innovation in the economy as a whole.

The World Bank defines knowledge economies according to four pillars: Institutional structures that provide incentives for entrepreneurship and the use of knowledge. Availability of skilled labor and a good education system. Access to information and communication technology (ICT) infrastructures. A vibrant innovation landscape that includes academia, the private sector, and civil society.

Academic institutions, companies engaging in research and development (R&D), programmers developing new software and search engines for data, and health workers using digital data to improve treatments are all components of a knowledge economy.

These economy brokers pass on the results of their research to workers in more traditional fields, such as farmers who use software applications and digital solutions to manage their crops better, advanced technological-based medical procedures such as robot-assistant surgeries, or schools that provide digital study aids and online courses for students.

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