Impacts Of A Knowledge Based Economy

Published Date: 02 Nov 2017

Discuss the following topics with relevant examples and Economic Theories.

"A knowledge based economy is one in which the production and distribution of knowledge has become central to spur economic growth and to create national wealth and employment"

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CONTENTS:

EXECUTIVE SUMMARY

INTRODUCTION

FOCUS AREAS:

Drivers of a knowledge based economy

Impacts of a knowledge based economy

Challenges and risks of a knowledge based economy

Key challenges of global managers

CONCLUSION

RECOMMENDATIONS

REFERENCES

EXECUTIVE SUMMARY:

A Knowledge based economy is where the jobs for the people with high education level is growing, compared to the people holding jobs with low education level in various fields. Increased productivity depends on this, as any growth in the employment of people with lower education levels contributes more to social coherence than to economic growth.

Knowledge based economy is society where the present generation of young people should be aged between 25 to 35 years and with a high literacy rate and less unemployment rate.

The link between educational qualifications and employment rates are usually interlinked:

the higher the educational qualification the higher the employment rate of that category.

There is a general agreement that educational qualifications and Human capital are important determinant of productivity and other economic outcomes both at individual level and at economy as a whole. many theories of human capital and growth suggest that some of the benefits of a more educated labour force will typically ‘leak out’ and generate

macroeconomic benefits that cannot be appropriated in the form of higher earnings by those who undertake the relevant investment. These leakages are often called externalities, and they provide an important a logical basis for a course of action for education subsidies and for other policies aimed at increasing human capital investment above its ‘free market’ value

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INTRODUCTION:

Knowledge Based Economy is an economy in which knowledge is created, acquired, transmitted, and used more effectively by individuals, companies, and communities to promote economic and social development. Today in industrial countries such as the U.S and Europe, knowledge-based industries are expanding rapidly where new technologies have been introduced, demand for high-skilled workers, particularly in information technology workers has increased significantly but at the same time, demand for lower-skilled workers has declined and this put a lot of pressure on the current education system of industrial countries to produce more high skilled people. As the 20th century draws to a close, the knowledge content of everyday goods and services is rising as never before. Accompanying this is an equally amazing explosion in the amount of information available to ordinary people.

Knowledge has been the heart of economic growth and the gradual rise in levels of social well being since time. the ability to invent and innovate, that is to create knowledge and new ideas that are converted into products, processes and organizations has always served as a fuel for development.

Knowledge based economy is a recently introduces term as it marks a break in the continuity with earlier periods. This transformation can be analysed at a number of different levels. A new kind of organization is spreading the phenomenon of knowledge based communities and networks of individuals striving to produce and circulate new knowledge. One sign that knowledge based economy is developing can be seen when such individuals penetrate conventional organizations to which their continuing attachment to an external knowledge based community represents a valuable asset. As these communities develop their activities, they become agents of change for the economy as a whole.

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3. FOCUS AREAS:

DRIVERS OF A KNOWLEDGE BASED ECONOMY: An economy based on knowledge favours customization, flexibility, rapid response and dis-internalization or deconstruction of the value chain.

A knowledge economy is based on four components:

A supportive government policy on economy to provide incentives for the efficient use of existing and new knowledge.

An educated and skilled workers to create, share, and use knowledge for economic advantage.

A dynamic information infrastructure to facilitate the effective communication, dissemination, and processing of information such as internet, mobile phones etc.

An efficient system of companies, university research centers and government agencies to tap into the growing global knowledge, assimilate and adapt it to local needs, and create new technology.

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IMPACTS OF A KNOWLEDGE BASED ECONOMY:

Knowledge, innovation and creativity are the keys to success with the globalization of the knowledge based economy. The winners in today's knowledge based economy will be companies that continuously use the borrowed capital to increase their intellectual capital. Knowledge is a key factor in the growth and development of cities and metros and of the economy as a whole. Worldwide, countries, societies and economies are being profoundly affected by globalisation and by the dynamics of knowledge and innovation, where knowledge profoundly shapes both productiveness and competitiveness international mobility of capitals and investments, highly mobile human beings, global problems of poverty, global environmental concerns and actions, worldwide security issues, international political and organizational activities and agreements. All these are a few impacts of our 'global’ knowledge-based economy.

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CHALLENGES AND RISKS OF A KNOWLEDGE BASED ECONOMY:

The current trends of globalization are shaping the structure of the markets and agents’ competitiveness. To face the new challenges posed by globalization and the knowledge-based economy all countries, whether big or small, need to implement the most suitable strategies, Knowledge-based economies like the United States, the Pacific Rim countries led by Japan, and the European Union are already doing so. Europe, as well as other players around the globe, is in fact increasingly relying on the creation and exploitation of knowledge

Regardless of past and present economic performances though, the global-and knowledge-based on typical example for synergic action. The achievement of long term growth objectives calls for new economic and societal frameworks.

We live in a period with a pace of change that has no historical precedent, and the generation of knowledge is certainly at the front bench. But it is equally very relevant who is producing knowledge and for which purposes. The fact that an increasing share of the R&D budget is profit-seeking implies that some areas are over-expanded and others are unjustly neglected. These trends will inevitably lead to a decrease of basic research investment. But much of technological advances rely on knowledge developed by humans just for their curiosity, when they did not anticipate at the time of investigation any useful outcome. Findings often anticipate applications. It is certainly true that public institutions are not the only organizations to perform basic research. Also companies perform it, and often with great success.

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KEY CHALLENGES OF GLOBAL MANAGERS:

The global managers are responsible for utilizing human, financial, informational, and physical resources in ways that facilitate their organization’s overall objectives in hostile environments about which they often understand very little. These challenges can be particularly problematic when operations cross national boundaries. The following are the common challenges faced by global manager's

To develop a learning strategy to guide both short and long-term professional development as a global manager.

To develop a basic knowledge of how different cultures work, what makes them unique, and how managers can work successfully across such environments.

To develop effective negotiating skills and an ability to use these skills to build and sustain global partnerships.

To develop effective cross-cultural communication skills.

To develop an understanding of how ethical and legal conflicts relate to managerial and organizational effectiveness, as well as how managers can work and manage in an ethical, fair, and socially responsible manner.

A global manager must also help a company face operational challenges associated with maintaining core competencies.

CONCLUSION: The central concern of the knowledge based economy is the need for modern industrialised nations to adopt a high skills and knowledge driven approach to economic development competitive strategy.

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