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The knowledge economy is a consumption and production system based on intellectual capital. In particular, it refers to the ability to exploit scientific discoveries and apply research.
The knowledge economy is a consumption and production system based on intellectual capital. In particular, it refers to the ability to exploit scientific discoveries and apply research.
In most highly developed economies, the knowledge economy accounts for a large portion of activity. In a knowledge economy, important components of value may include intangible assets, such as the value of its workers' knowledge or intellectual property.
Developing economies tend to focus heavily on agriculture and manufacturing, while highly developed economies have a larger share of service-related activities. This includes knowledge-based economic activities such as research, technical support and consultancy.
The knowledge economy is a market for the production and sale of scientific and engineering discoveries. This knowledge can be commercialized in the form of patents or other intellectual property protection. Producers of such information, such as scientific experts and research laboratories, are also considered part of the knowledge economy.
Important Note: The Bayh-Dole Act of 1980 was an important turning point in the treatment of intellectual property in the United States because it allowed universities to retain ownership of inventions or discoveries made using federal R&D funds and to negotiate exclusive licenses. [1]
Due to globalization, the world economy has become more knowledge-based, bringing with it the best practices of each country's economy. Furthermore, knowledge-based factors create an interconnected global economy in which human expertise and trade secrets are considered important economic resources.
However, it's important to note that Generally Accepted Accounting Principles (GAAP) do not allow companies to include these assets on their balance sheets.
Note: The modern commercialization of academic research and basic science stems from governments seeking military advantage.
The knowledge economy explores how education and knowledge (i.e., "human capital") are sold and exported as a productive asset or business product, thereby generating profits for individuals, businesses, and economies.
This component of the economy relies primarily on intellectual abilities rather than natural resources or physical contributions. In a knowledge economy, products and services based on intellectual expertise drive developments in technology and science, thereby promoting innovation throughout the economy.
The World Bank defines the knowledge economy based on four pillars:
Academic institutions, companies engaged 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 part of the knowledge economy.
These economic brokers pass on the results of their research to workers in more traditional fields, such as farmers using software applications and digital solutions to better manage their crops, medical procedures based on advanced technologies (such as robot-assisted surgery), or schools providing students with digital learning aids and online courses.
Because it is not a clearly defined category, such as manufacturing, it is difficult to put an exact price tag on the global knowledge economy. However, a rough estimate can be obtained by measuring some of the main components of the knowledge economy. In the United States, the total IP market is worth 568 billion. [3]4
The Organization for Economic Co-operation and Development (OECD) believes that while higher education and technical training are obvious assets, communication and teamwork are also essential skills for a knowledge-based economy. Since it is unlikely that any single knowledge worker will produce breakthrough innovation alone, these interpersonal and workplace competencies are critical to surviving in the knowledge-based workplace. [5]
Factors in the knowledge economy are measured by the United Nations Development Programme’s Global Knowledge Index, which after 2012 replaced the World Bank’s Knowledge Economy Index. The indicator scores each country based on "enablers" of the knowledge economy, such as education levels, technical and vocational training, innovation and communications technology. According to the latest edition, Switzerland is the highest-ranked knowledge economy with an overall score of 71.5%. Following closely behind are Sweden and the United States, both with scores of 70.0. [6]
[1] GovTrack. "H.R. 6933 (96th): Government Patent Policy Act of 1980."
[2] The World Bank. "The Knowledge Economy, The Kam Methodology, and World Bank Operations," Pages 5-8.
[3] Ibis World. "Colleges and Universities in the US."
[4] Global Innovation Policy Center. "Why Is IP Important?"
[5] OECD. "Competencies for the Knowledge Economy," Page 1.
[6] Knoema. "Global Knowledge Index."
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