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Knowledge Economy


21 Nov 2022 00:00:00 | Update: 20 Nov 2022 22:22:31
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.

While higher education and technical training are obvious assets, communication and teamwork are also essential skills for a knowledge-based economy, according to the Organization for Economic Cooperation and Development. Since it is unlikely that any single knowledge worker can generate groundbreaking innovations alone, these interpersonal and workplace competencies are essential to surviving in a knowledge-based workplace.

The factors of a knowledge economy are measured by the United Nations Development Program's Global Knowledge Index, which replaced the World Bank Knowledge Economy Index after 2012. This metric scores each country based on "enabling factors" for the knowledge economy, such as education levels, technical and vocational training, innovation, and communications technology. According to the latest issue, Switzerland is the top-ranked knowledge economy with a total score of 71.5 per cent. The next two are Sweden and the United States with scores of 70.0 each.

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