Global based knowledge economy and Acceleration of innovation

Various observers describe today’s global economy as one in transition to a ‘knowledge economy’, or an ‘information society’. But the rules and practices that determined success in the industrial economy of the 20th century need rewriting in an interconnected world where resources such as know-how are more critical than other economic resources. This briefing highlights recent thinking and developments and offers guidance on developing appropriate organizational strategies to succeed into the new millennium. It summarizes key conclusions from our trends database and research analysis.

Growing Interest

Various management writers have for several years highlighted the role of knowledge or intellectual capital in business. The value of high-tech companies such as software and biotechnology companies, is not in physical assets as measured by accountants, but in their intangibles such as knowledge and patents. The last few years have a growing recognition by accounting bodies and international agencies that knowledge is a crucial factor of production.

Driving Forces

Our analysis suggests three interlocking driving forces are changing the rules of business and national competitiveness:

• Globalization - markets and products are more global. Products by Nike and Virgin are known the world over. Today, even resourcing is becoming global. Thus many companies outsource manufacturing and software development to distant locations.
• Information/Knowledge Intensity - efficient production relies on information and know-how; over 70 per cent of workers in developed economies are information workers; many factory workers use their heads more than their hands.
• Networking and Connectivity - developments such as the Internet bring the 'global village' ever nearer.

The net result is that goods and services can be developed, bought, sold, and in many cases even delivered over electronic networks. Electronic commerce offers many advantages in terms of costs savings, efficiencies and market reach over traditional physical methods

 There is an accelerated rate of innovation in the context of a knowledge-based economy, in which ideas and innovation are increasingly the drivers of economic growth. In discussing the rise of the knowledge-based economy, Paul David and Dominique Foray relate the acceleration of knowledge production to the interrelationship between four developments:

• The growing share of intangible capital including investment in education and training, research and development, and information and coordination as well as health expenditures as compared to tangible capital in total capital formation.
• The growing speed and intensity of innovation, and the increasing diversity of sources of innovation, including users themselves as co-creators of new or improved products and services.
• The ICT revolution, which has fundamentally transformed the conditions for creating, storing, accessing, distributing and reusing information and data.
• The rise of knowledge-based communities and global knowledge networks, where information can be easily shared and re-used, and where collaboration can occur that is not reliant upon physical co-presence in particular geographical locations.

The media industries, broadly defined, have been at the center of these developments. In its survey of corporate executives’ responses to the global digital economy, Oxford Economics found that the three business sectors that anticipated the most dramatic transformations over a five-year timeframe were IT and technology; telecommunications; and entertainment, media and publishing.

   By Segesela Blandina

     BAPRM 42663