3.1 Introduction

3.1 Introduction

            It is now almost 40 years since the economist, Daniel Bell, predicted the birth of a post-industrial economy in which knowledge would become the basis of economic power, and work and jobs would become increasingly knowledge intensive and skill-dependent (Bell, 1973). Subsequent events have proven his predictions to be remarkably accurate. US college graduates reportedly earn nearly three times the annual salaries of their compatriots with lower secondary qualifications. Organizations with greater intellectual capacity nowadays dominate world stock markets. In 1993, Peter Drucker predicted that knowledge will become the only economic resource that matters; moving us into an era of ‘knowledge capitalism’ (Burton-Jones, 2003).

            The use of knowledge assets in the economy is not new – knowledge based institutions such as universities go back centuries. But, towards the end of 20th century (from late 1970’s)  three major economic and social forces combined to trigger a radical change in socio-economic structures of global society that expanded the use of intellectual assets and brought them to the centre of economic activity across the globe. These forces were (Brinkley et. al., 2009):

  1. The availability of increasingly powerful and relatively cheap general purpose information and communication technologies; created a boundary less environment for sharing information, ideas, and knowledge.
  2. The phenomena of globalization;  opens up both markets of global scale and an endless variety of niche markets as well as speed up the spread and adaption of new technologies and ideas.
  3. The rising standards of living in the advanced industrialized economies; created well-educated and demanding consumers asking for value added services that the knowledge economy can characteristically supply. 

            Such radical changes set the foundation for the growth of an economy in which knowledge and technical capacity contribute an ever greater share to organizational sustainability. This newly emerged economy is labeled as “knowledge Economy”.

            Our world now is defined more than ever before by its knowledge economies. The application of knowledge, as manifested in areas such as entrepreneurship and innovation, research and development and in people’s education and skills levels is now recognized as the key sources of growth and competitiveness in the global economy. The increasing economic importance of knowledge is redefining organization–market boundaries, work arrangements and the links between education, work and learning (Burton-Jones, 1999).

            In the new, knowledge-intensive economy, individuals and organizations have realized that the single most decisive factor in influencing organizations’ sustainability is the growth of intellectual assets which is essential for innovation. Regardless of other factors, innovation has become the engine of economic growth. Therefore individuals and organizations focus on nurturing and enhancing their biggest asset: their knowledge capital which is the essence of newly emerged knowledge economy (Nonaka & Takeuchi, 1995).  

            Knowledge economy has brought a paradigm shift in business world - from thinking in terms of production to thinking in terms of innovation. It involves the ways organizations create, promote, manage, disseminate and value knowledge for their economic and social development.   The latest developments of Information and Communication Technologies are fueling this shift by spreading new ideas and innovations to even greater numbers of people. Individuals, organizations and communities are no longer limited by geographical locations or economic conditions.  This has introduced a new culture in which learning, unlearning and relearning is not simply being desirable, but essential. Organizations and people acquire, create, disseminate, and use knowledge more effectively for greater economic and social development.  To meet the challenges of knowledge economy, as Burton-Jones (2003) suggests, both individuals and organization must understand that working and learning become synonymous, firms, workers, educators and intermediaries will all have to adopt new roles and develop new strategies. They must understand the dynamics of demand and supply of the knowledge markets of the new economy. In this chapter we will be discussing such aspects related to knowledge economy.