Monday 1 June 2015

The Knowedge-Based Economy: A review of the literature

This is an extract from a report written by Trevor Cairney, Liz Sommerlad & Chris Owen (2002) for the  
Board of Vocational Education and Training (NSW) in 2002. 
The full review is available HERE.


There is no universally accepted definition of the knowledge based economy. As a concept, it is very loosely employed and embraces a number of quite different visions of the economy and society.

One view, most evident in OECD publications, sees it as very much bound up with the high skills/high performance/high value added scenario as the only way for firms to compete in a globalised economy.

Another view, found principally in the scientific and technical community, tends to view it more narrowly as applying to knowledge intensive industries where knowledge itself is the core competence. The latter is typically found in software and internet companies, computer hardware and chip manufacturers, computer and electronic equipment sectors, and health care technology.

A third view, the one adopted in this review, is that all sectors of industry are becoming more knowledge intensive in the very broad sense of that term. Knowledge is seen as a potential generator of productivity improvements in areas as diverse as quality, customer service, variety, speed and technical improvement, as well as innovation in products, processes and organisational structure and behaviour. As companies alter the way their organisations are structured (flatter, non-hierarchical, team based, multiskilled) in order to compete more effectively, so too workers have needed to obtain a more complex range of cognitive and intellectual resources.

This research project sought to extend our understanding of the impact of the knowledge based economy on the content of work and training. It set out to do this by acknowledging multiple perspectives on how economies grow and by embracing new definitions of skills, knowledge and training that reflect recent research. In this project, a knowledge based economy was defined as one that is increasingly dependent for its growth on the input of knowledge as a value-added input to the economic system. This is reflected in a change in the basis of ‘competitiveness’ for economies, organisations and individuals. This is realised in four interrelated ways.

1. First, such economies experience a changing structure exemplified by new industries, occupations and organisational arrangements.

2. Second, there is a change in the types of skills required, with a rise in the importance of generic skills, including the ability of individuals to work more autonomously; be self-managing, work as part of flexible teams, adapt to change, solve complex problems, think creatively and engage with innovation as a continuous process.

3. Third the economy requires new forms of knowledge and places increased importance on the creation and application of knowledge in networks or clusters of companies/enterprises, and within ‘communities of practice’ where workers are required to work together in new and more complex ways.

4. Fourth, innovation becomes more important as a means to increase economic competitiveness, and knowledge management becomes increasingly the key to sustainable competitive advantage, requiring individuals, firms, regions and indeed complete economies to acquire, create and use knowledge as the key productive resource.

Since the 1960s there has been a growing awareness of the decline of the importance of the control of resources for wealth creation, the emerging dominance of specialist knowledge and competencies, as well as the management of organisational competencies and knowledge.

If you'd like to read more on this topic you can download the full review HERE.

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