knowledge as a dominant economic paradigm: the … · contemporary society becomes a learning...

KNOWLEDGE AS A DOMINANT ECONOMIC PARADIGM: THE

KNOWLEDGE ECONOMY ANTONELLA LAINO, UNIVERSITY E-CAMPUS, COMO, ITALY

[email protected],+39 3384035284

The knowledge economy has become in recent years, thanks to globalization and the massive diffusion of information

technologies, a dominant economic paradigm. This forces institutions and individuals to redefine the interpretative

schemes of economic phenomena. This article attempts to establish the role played by the knowledge economy in the

growth and development of countries.

KEYWORDS

Knowledge, knowledge economy, innovation, knowledge indicators

JEL codes

D24, D83, O11, O34, O40

INTRODUCTION

Globalization and the technological

revolution have transformed the dominant

economic system into the knowledge

economy. The new economic paradigm

governs the business world, and requires rapid

development of skills and knowledge. Thus,

contemporary society becomes a learning

society.

In the first part of the paper we introduce the

theme of knowledge and the knowledge

economy, as a new model of economic

development. After briefly investigating the

role of innovation in the knowledge economy,

we proceed to an analysis of the relationship

between knowledge economy and traditional

economy, going to identify which 'traditional'

economic rules are no longer applicable to

new production models and of consumption.

Finally, we examine two of the most

important indicators designed to 'measure' the

level of approach to the knowledge economy.

THE KNOWLEDGE

According to the UNESCO 2005 report,

knowledge can be defined as the ability to use

information for general purposes, therefore

economic, social, ethical and political.

Knowledge as an 'object' is treated in the

positivistic thinking according to which the

theoretical laws can predict the behaviors that

individuals will assume in reality. As is well

known, positivism, in some ways such as

Enlightenment, manifests a profound trust in

science and technological progress

(Geymonat 1978).

But in the numerous post-positivism studies

the awareness has been reached that the

individual in his behavior is not only the

result of a nature alien to him, and not subject

to higher laws. The individual is the result of

collaborative and participatory work that

involves many actors through a continuous

cognitive process and emerges during the

action (Davenport, Prusak, 1998).

Knowledge can take many different forms,

and in this regard the economic literature

speaks of tacit knowledge, that is, a

knowledge rooted in behavior, in the action

exercised in a given context, codified

knowledge, that part of knowledge that can

easily be transferred through formal language,

embodied knowledge, that is, knowledge

derived from practical thinking, encoder

knowledge, ie symbols contained in books,

manuals, information technologies, embrained

knowledge, ie conceptual and cognitive

knowledge and skills, embedded knowledge,

ie organizational competence, or procedural

knowledge, i.e. the knowhow (Weick,

Roberts, 1993).

From the economic point of view, knowledge

is a very particular good for the specific

characters it is equipped with. It is a common

good that is difficult to privatize, not

exclusive and non-competitive, since the one

who transmits knowledge does not deprive it

of it definitively. It is also an asset with very

low reproduction costs, which is created

thanks to communication processes and

voluntary cooperation.

Antonella Laino, Int. Eco. Res, 2019, V10 i1, 114 – 127 ISSN:2229-6158

IJER – JANUARY – FEBRUARY 2019 available online @ www.ijeronline.com

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mailto:[email protected]

Knowledge originates from basic and applied

research that are normally financed by public

subsidies, as well as education, which is one

of the tools through which it is transmitted

and disseminated. Thus, two of the essential

factors of the development of knowledge

'belong' to the public sphere and not to that of

the market, as happens in the tradition of

capitalist economy.

Knowledge is therefore an intangible

economic good, embedded in the individual

and sometimes difficult to code. In this case

we speak of tacit knowledge that can be

transmitted only through informal learning

processes that imply high capacity for

observation, reflection and re-elaboration, in

addition to the acquisition of new knowledge

(Bratiany , Bejinaru , 2016)

This complex process is normally activated in

flexible organizational environments, such as

learning organizations, and in social contexts

where there is a high social capital. In fact, in

order for a community to move towards the

knowledge economy it is necessary that the

majority of its components welcome the

concept of organizational learning, and of

widespread learning, because only a learning

organization expands the ability to survive in

the future (Senge 1990).

Knowledge generates value through utility,

propagation and proprietary regulation.

Knowledge must create usefulness for the end

user and this utility must also remain in the

uses subsequent to the first. The re-use of

knowledge is never a mere process of

replication, but rather a continuous

regeneration of the original knowledge

(Grandinetti 2002). The effectiveness created

through knowledge is manifested by an

objective improvement of performances and

processes, in terms of lower costs or the

achievement of new functionalities.

Knowledge also produces value through its

diffusion, which makes it possible to multiply

the value by the users, expanding the scope of

use in time and space. The value of

knowledge, generated by its diffusion,

increases with the growth of new uses,

determining the phenomenon of network

externalities. It is precisely in this context that

the character of knowledge emerges as a good

that can reproduce itself at decreasing costs.

In fact, the cost, sometimes very high, is

concentrated in the first unit produced, the

realization of which often requires a long and

uncertain process of learning through

research. The multiplication generates

considerable benefits for those who use

knowledge, but rarely protects producers who

invest and face the risk to produce new

knowledge.

The regulation of knowledge ownership is

essential to make the process sustainable.

Knowledge, to generate economic value and

competitive advantage, must be effective in

the use, allow the multiplication of uses,

giving rise to an increasing number of re-uses

and spreading the fruits obtained according to

a process that attributes to each stage of the

production chain a share, an enhancement of

the product, at least sufficient to encourage

the subject to maintain its role.

If the ability to appropriate knowledge returns

is not adequately safeguarded, the return on

capital that is invested to obtain new

knowledge becomes close to zero and the

producer is displaced by the market in which

the phenomenon of free riding will emerge.

The displacement effect will occur by the

person who will be able to benefit from the

asset without paying the rights to the

legitimate producer. On the other hand,

excessive protection can result in high prices

for the use of knowledge imposed by the

monopoly producer, excluding many possible

users from use, with a consequent reduction

in the social value of knowledge (David

2001).

KNOWLEDGE AND INFORMATION

A fundamental distinction must be made

between knowledge and information.

Knowledge is the ability to act intellectually,

therefore implies the presence of cognitive

abilities, while information takes the form of

a structured data that remains passive until it

is used by those who have the knowledge to

interpret and process it. This distinction

appears even more evident when examining

the conditions for reproducing knowledge and

information. The cost to replicate information



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does not exceed the cost of simple copying,

while the replication of knowledge is a

process that involves the possession of

cognitive skills that are not easily

transferable. We could say that information is

one of the components of knowledge, perhaps

the essential component for the production of

knowledge: and it is precisely the ability to

generate, process and store huge information

flows at very low costs the fundamental

prerequisite for the development of

knowledge, even if, without the latter, the

information is not able to create competitive

advantage. In other words, knowledge

provides the tools to activate information

(White et al. 2012).

Information can therefore be defined as

knowledge capable of creating value (Sullivan

2001). And information takes on value only

because learning can transform it into

knowledge. And the fact that today

information is available at cost, and in

quantities, previously unthinkable, makes

possible an exceptional development of

knowledge in all fields of human action.

THE KNOWLEDGE ECONOMY

The attention on the theme of the

accumulation and valorization of human

capital indicates how, in the current

globalized economic context, the recognition

of the centrality of knowledge for economic

and social progress is strengthened, so much

so that the development of advanced

economies is almost exclusively the field of

knowledge economy (Rooney et al 2005). It is

now peaceful in doctrine, and not only, that

knowledge is crucial for growth and

development.

The OECD defines the knowledge economy

as the economy based on the production,

distribution and use of knowledge and

information.

The transition from investment in physical

assets to investment in intangible assets is

fundamental for the history of the knowledge

economy. This appears to be a distinctive

element, so much so that the technological

change taking place in the advanced countries

is increasingly oriented towards the

introduction of knowledge-intensive

production processes and decreasing intensity

of physical capital. Organizations are

increasingly relying on the exploitation of

knowledge by investing in the processes that

create this resource. In other words, we can

speak of the knowledge economy when the

weight of the information-related sectors is

prevalent, and the intangible share of capital

in the total stock of capital has become greater

than the share of physical capital (Kendrick

1994).

This should not lead us to believe that

knowledge is a 'new' productive factor, but

rather that its relative value with respect to

traditional factors such as land, labor, and

capital has increased greatly in recent

decades. Ultimately, knowledge is a substitute

for other factors, given that in recent years

and, in the future, the area of economic

growth will be oriented towards the

processing and manipulation of knowledge,

rather than the manipulation of raw materials.

The new economy is dominated by the

creation of knowledge, its elaboration and its

transmission. Thus, in the age of knowledge,

competitive advantage and economic growth

depend on the quantity and quality of learning

processes, the ability to access knowledge and

the ability to disseminate it, extracting from

this resource the greatest possible value

(Rooney et al 2005).

While Adam Smith allowed the 'wealth of

nations' to reside in the specialization and

division of labor, today wealth depends on

information, technology, and communication.

In this context, knowledge is transformed into

'raw material', which is created, exchanged,

learned, conserved, developed and protected,

because it is fundamental to realize profit and

create a sustainable economic system.

OECD argues that "... in the knowledge of

the extent and quality of knowledge-related

indicators. Traditional national accounts are

not convincing explanations of trends in

economic growth, productivity and

employment (OECD 1996). And since

knowledge is embedded in the individual and

in his work, technological change is directed

towards an increased intensity of work.



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According to the principles of the knowledge

economy, the business world is governed by

new forms of organization and work, and this

requires a rapid development of skills. In this

new context, society becomes a learning

society and educational systems are called

upon to play a key role in training subjects

able to continuously develop their skills by

integrating fully into the socio-cultural

context in which they live and work.

The knowledge economy bases its

development on globalization and

digitization, characterized by the

immateriality of transactions. But the process

of developing knowledge is not limited to

this: it defines a new model of wealth creation

based on the value created by the productivity

of innovation that is obtained by applying

knowledge to work. And in this scenario the

real challenge of post-capitalist society will

be the productivity of knowledge-based jobs

and skills (Drucker 1999).

The key factors of the knowledge economy

are therefore the market demand expressed by

consumers, the development of new

technologies and globalization (David, Foray

2003).

As for the demand expressed by consumers,

we can see that in recent years there has been

a shift of preferences towards the

consumption of services, especially if

generated by knowledge-intensive industries,

also thanks to the low-cost IT technology that

has created global information networks, as

well as global markets for products and

services, which have developed in every

sector, greatly reducing transaction costs.

The process of globalization has allowed the

opening of and towards new markets, also

involving the offer of products and services,

as well as internationalizing the production of

the exchange of knowledge. As a

consequence a global market of highly skilled

workers and flows of ideas and continuous

information has been created.

The market for end consumers, however, has

become very powerful, sophisticated and

varied: in other words, we move from

segmented markets to increasingly

personalized markets, which are strongly

influenced by the influence of consumer

preferences.

Part of this change, as mentioned, is due to

the reduction of the price of many basic

necessities which has made available more

shares of resources for households with a

consequent increase in the demand for goods

and services that are not strictly necessary.

This was further stimulated by the significant

reduction in the price of technological assets.

And many studies show that spending on

luxury goods or high-quality goods is likely to

rise in the next few years, causing emotions,

hence intangible assets (Silverstein, Butman,

20016). Already Maslow claimed that

individuals, once satisfied the primary needs,

physiological and security, tend to shift the

preference towards the satisfaction of

cognitive, aesthetic needs, higher than the

primary, defined needs of self-realization.

When companies become more affluent, the

subjects decide to divert an increasing part of

their disposable income towards this kind of

consumption (Maslow 1954).

If the increased security and prosperity is

added to a considerable reduction in the time

needed to ensure that a product reaches the

market there is a strong possibility of choice

that results in a significant contraction of the

average life of goods (Inglehart, 1991).

In fact, this trend was already underway at the

end of the last century, if one thinks that a US

study found that the number of packaged

goods grew from about 5,000 units in 1980 to

25,000 in the late 1990s (Federal Reserve

Bank of Dallas 2000).

As mentioned, the significant growth in the

creation and dissemination of knowledge is

also due to the considerable progress of

information and communication

technologists, which have significantly

reduced transaction and contact costs. With

the increase in accessibility of information,

computing power thanks to the development

of highly sophisticated hardware and

software, and with the development of

electronic networks, an efficient system for

disseminating knowledge has emerged

(Bratianu, Bejinaru, 2016). Precisely through

the appropriate exploitation of new

technologies, researchers and research groups



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located in areas that are very distant from

each other can collaborate, sharing the

accumulated knowledge, increasing the

productivity of research. The knowledge

revolution and globalization, therefore,

present considerable opportunities for

economic development, which will have

positive repercussions in the social, cultural

and environmental fields (Suh, Chen 2007).

Contrary to what one might think, however,

the concept of knowledge economy does not

necessarily revolve around the concept of

high-tech and information technology. For

example, even the application of new

techniques to subsistence agriculture can

improve the returns of the sector; and the

technological use of logistic systems can

allow the evolution of traditional craft sectors

towards new markets. It is true, however, that

the transition to the knowledge economy

implies the start of long-term projects that

require investments in the training system, the

development of innovation capacities, and an

economic environment conducive to

achieving these objectives.

According to the World Bank, there are four

pillars of the knowledge economy:: education

and training, an educated and skilled

population is needed to create, share and use

knowledge; information infrastructure, a

dynamic information infrastructure-ranging

from radio to the internet is required to

facilitate the effective communication,

dissemination and processing of information;

economic incentive e institutional regime, a

regulatory and economic environment that

enables the free flow of knowledge, supports

investment in information and ICT, and

encourages entrepreneurship is central to the

knowledge economy, innovation systems, a

network of research centres, universities,

think tanks, private enterprises and

community groups is necessary to tap into the

growing stock of global knowledge, assimilate

and adapt to local needs, and create new

knowledge (World Bank 2006).

The achievement of these objectives

postulates the need for economic policy

interventions that allow the mobilization and

allocation of resources in an efficient way, an

innovative system that integrates the

resources of companies, universities, research

centers and all the organizations that in

different ways they can contribute to the

creation, acquisition, diffusion and use of

knowledge. The result of this process will be

the creation of high added value goods and

services (Suh, Chen 2007).

The transition to the knowledge economy has

taken place on a global scale and has affected

all industrialized economies, as well as being

a target for developing economies. In fact,

globalization has allowed the best and most

agile distribution of information, data and

knowledge, also thanks to the massive use of

new information technologies (Viedma,

Cabrita, 2012).

The OECD considers the knowledge economy

characterized by a high level of

professionalism, high performance and high

added value, therefore as a new way of

competing in the globalized economy, so

much so as to define it as "economies in

which are directly based on the production" ,

distribution and use of knowledge and

information '(OECD 1996).

Adopting this new model of production and

society means giving greater value to science

and education, recognizing them as drivers of

social progress. In this scenario, institutions

are given the difficult task of developing

human capabilities, focusing on education,

science and professional training, because

only by following this path is it possible to

integrate into the processes of globalization.

It is therefore clear that, in the knowledge

economy, the importance of intellectual

capital is amplified, as a consequence of the

growing dependence of organizations on

intangible assets. For every organization

knowledge is synonymous with power and

profitability, and intellectual capital is a key

element to ensure the sustainability and

survival of the organization in the long run.

In the knowledge economy, individuals are no

longer isolated entities, but subjects that

interact to create projects, solve problems,

take initiatives. Individuals participate in

production and consumption by building

networks of relationships parallel to market

relations. In the knowledge economy,



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consumption becomes creative and is no

longer a passive component that delegates to

others the interpretation of one's own needs

and the creation of one's own desires, as

happened in industrial society (Micelli 2000).

In the knowledge economy the value of time

changes: knowledge creates irreversibility

because every knowledge produced

subsequently will no longer have the same

cost; moreover, in order to maintain validity

over time it is necessary to update it, and

adapt it, sustaining costs. Knowledge is

organized in paths that foresee successive

stages of development, and in its evolutionary

path develops through attempts. And the

quicker the possibility of losing the

proprietary control of knowledge, the faster it

must be to spread.

The dissemination of knowledge generates

ideas that go beyond the boundaries set by

legal norms and rules of secrecy. At all levels

of the value chain, externalities are generated

that occur when the investments made by the

knowledge producers produce benefits in

favor of subjects who have not borne any

burden and have not borne some risk. The

externalities produce asymmetries altering the

competition (Rooney et al 2005).

In the first phase of its development, the

knowledge economy has focused attention on

the negative consequences of the idiosyncratic

characteristics of knowledge, in terms of

market failures resulting from limited

incentives to the production of knowledge due

to the high externalities produced.

In the second phase of development, which

ideally dates back to the late seventies,

attention is paid to the positive effects of the

limited appropriability in terms of spillovers

produced by the knowledge resource

(Griliches 1979). And the revaluation of this

element has paved the way for the

development of new theories on growth.

Traditional economic theory in many ways

still has its center of gravity in the static

equilibrium and in the allocation of resources

for alternative uses, while the knowledge

economy cannot be based on these elements

given its dynamic nature, not manageable

within the traditional allocative trade-offs.

In this context is developed a theory of the

enterprise that converges towards the studies

on the innovative enterprise. According to this

approach, the enterprise is a kind of living

being that evolves over time, following paths

of development similar to those of organisms.

Already since the seventies of the last century

the evolution, and growth, of enterprises is

seen as a result of the accumulation of

intangible assets, connected to strictly

qualitative aspects of the work (Penrose,

1973). In the microeconomic field, a theory of

an alternative to the neoclassical enterprise

has evolved, the evolutionary theory, based

on the idea that companies have an

evolutionary process (Sterlacchini 2005). In

the evolutionary approach, the knowledge

economy is analyzed as a separate model not

comparable with the neoclassical model, and

new hypotheses are introduced on the

behavior of companies. The evolutionary

approach to the company starts from the

studies of Nelson and Winter at the beginning

of the eighties of the last century.

With this approach, particular attention is paid

to the dynamics and processes of change in

organizations (companies), and the

knowledge, produced within the company or

acquired by it, is assumed as the main unit of

analysis. In this vision, change is a central

element for understanding the evolutionary

dynamics of organizations, and is activated by

selection mechanisms: in other words, the

environment determines the success or failure

of an innovation and / or a company. The

market is seen as a mechanism for selecting

the best companies, that is, the most

innovative ones. Unlike the scenarios

presented by the neoclassical theory, in the

evolutionary perspective the environment in

which the company operates is dominated by

uncertainty, in which research and innovation

are dynamic and complex phenomena

(Nelson, Winter 1982)

Subsequent theoretical developments identify

the role of Markov processes based on the

evolution of routines that the organization

knows and is able to activate in the face of

problems to be solved (Nelson, Winter, 1982).

Routines represent the genetic heritage of the

organization that evolves through a natural



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selection made by the environment, in the

case of companies, from the market. Routines

are behavior patterns that the business learns

and continually applies to problem solving.

And the company is nothing but a routine

hierarchy, with a mainly tacit character. They

represent the product of a cumulative learning

(Cosini 2013). The organization's

performance does not depend solely on the

ability to conceive or acquire innovative

routines, but also on the ability to make the

various routines synergistic and integrated. It

is in this context that the model of the

learning organization is developed, that is, of

an organization that learns, which facilitates

learning by its members and for this reason is

continuously transformed to face the constant

pressures of the market (Senge 1990).

According to this model, businesses must

interact, developing a tendency to share and

connect, rather than competition. And it is in

this context that from the concept of

knowledge we move towards the concept of

competence (Boyatzid 2008); or to the

management of knowledge as a common

good (Hess, Ostrom 2009).

From what has been said up to now, it

emerges that, globally, the economy has

passed from a model based on industry to a

knowledge-based economy, in which the

competitive advantage is to be found in the

ability to exploit the resources of knowledge.

Precisely for this reason we are talking about

a knowledge society (Toffler 1983), an

information society (Harrison, Kessels 2004),

and intangible economics (Andriessen 2004).

If we try to carry out a comparison exercise

between traditional economic, based on

industry, and the knowledge economy we find

significant differences.

First of all, the knowledge economy is not

based on scarcity, but on abundance, because

unlike most of the resources that at the

moment of consumption erode their own

value, information and knowledge can be

shared without that altering it; on the

contrary, an increase can emerge from sharing

(Ricceri 2008).

Furthermore, the knowledge economy must

be subject to rules, even regulations, which

are partially different from those valid for the

industrial economy, since it is difficult to

apply regulations and restrictions in force in a

country to resources that circulate freely from

one continent to another responding only to

the laws of the demand for knowledge

(Nissen 2006).

In the traditional economy, prices can also be

uniform, while for information and

knowledge prices these vary greatly

depending on the context and the moment.

Lastly, knowledge is incorporated into

systems and processes and has a much higher

value than when it circulates freely. The skills

that originate from knowledge are a key

component in the enhancement of an

organization, but all these elements are not

included in the company accounts and are not

included in the accounts and company

budgets (Antonelli, Colombelli 2011).

The knowledge economy is labor intensive

and consumes time because it uses high

quality work to explore a space of

possibilities that would not be possible for

machines.

In models of endogenous neoclassical growth,

such as the Lucas model, or the Romer model,

knowledge is recognized as a productive

resource, but it is incorporated into human

capital and / or physical capital. But the

simplification of the models does not allow, at

least in this case, making perceive the

innovative scope of this economic paradigm.

Knowledge needs time to accumulate,

integrate, become coherent with the context of

reference, following paths that cannot be

represented validly by equations and

mechanical algorithms.

It is hardly worth mentioning how in recent

years the expression 'society' of knowledge

has often been used to describe contemporary

society. The fact of referring to knowledge

should not make us believe that it is a society

populated by informed and educated

individuals, but it alludes to the fact that

individuals in their personal and work life are

continually required to seek, process, acquire

knowledge as new capital to accumulate. In

order to grow, develop and be competitive,

this society must make its human resources

productive, must facilitate and promote the

spread of science and technology, must



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develop the ability to face changes and renew

knowledge and skills. In other words, it is a

matter of favoring a society of lifelong

learning. And it is precisely the fact that

society deems it necessary to produce not so

much material objects, as immaterial,

symbolic objects, which condition the needs

and values that put the individual and his

knowledge in the foreground that makes

'knowing' its main wealth(David, Foray,

2003) .

In a society with these characteristics a

specific importance is attributed to the

learning process, which must be continuous,

that is, to interest every phase of the

development and growth of the individual.

The birth and development of the knowledge

society are unquestionably linked to the

development and diffusion on a global scale

of ICT, which allows the conservation,

transformation and transmission of

information in a very fast way (Cerroni 2018).

THE KNOWLEDGE ECONOMY AND

INNOVATION

The knowledge-based economy promotes

innovation as a driver of development, as well

as supporting entrepreneurial initiative and

dynamism, since knowledge is the only high-

yielding factor (Skrodza 2016).

In an economy with the characters described

above the enterprise must necessarily be

innovative to develop; and open innovation,

although apparently a contradiction in the

management of the company, must be read as

an opportunity for integration and

collaboration between companies (White and

others, 2013). Already Schumpeter, in his

theory of innovation, shares the idea that

knowledge is a fundamental element of the

innovative process. In other words, innovation

is a form of knowledge that experiences the

possibility of direct commercial use.

If in the traditional economy innovations were

the result of separate processes of research,

development and production, often activated

by different subjects, in the knowledge

economy, innovation emerges from networks

and processes of interaction collaboration.

To develop innovation it is necessary that

there are opportunities, which derive from the

continuous interaction with the environment,

from the organization, which can bring out

new classes of problems and that pushes to

identify innovative methods for the solution,

from accumulated knowledge, skills and from

relationships, because innovations cannot be

born in isolation, but develop through

relationships that are formed in specific areas

(Macvaugh J., Schiavone F, 2010).

Innovation is nothing other than the

production of new knowledge with economic

value, as it can be used in production

processes, and capable of triggering processes

to improve production capacity. It is realized

as a result of knowledge, learning and skills.

Knowledge represents understanding,

processing and assimilation of information;

learning is the process through which

knowledge is assimilated, therefore the

original knowledge is transformed into new

models of thought and action. Skills are

effects of the learning process and represent a

tool for using knowledge to achieve

innovation.

THE KNOWLEDGE AND ECONOMIC

THEORY

For a long time the link between economics

and knowledge has been neglected by the

dominant economic theory for which

knowledge has remained exogenous

magnitude, dependent on technology and

other external factors. Knowledge is an anomalous productive factor

that generates value differently from

'traditional' production factors: the good

knowledge is, at least for some

characteristics, a public good, as it is not rival

and, partially not excludable. It is also a

cumulative asset capable of generating

positive externalities. These characteristics

bring to light a failure of the market of good

knowledge: in fact this creates a social value

higher than private value. In other words, the

knowledge market presents sub-optimal

incentives to production. And the exploitation

of the knowledge economy and the rules that

it follows, which are partially different from



121

those of the industrial economy, determine

abnormal behavior in the variables

traditionally considered in the analysis.

The incentive for the search for knowledge

cannot be found only within the traditional

market mechanisms, and this explains why

much of the knowledge, above all of basic

knowledge, is developed by operators of

public nature or with public support (Zuniga-

Vicente and until 2014).

The production of knowledge takes place

largely through the work of the scientific

community, in which rules are partially

different from those of the market. The

scientific community is fueled by incentive

mechanisms of a not only economic nature,

and this explains the tendency to disseminate

research results, rather than protection. In the

scientific community, the investment to

acquire knowledge is not dominated by the

need to make a direct profit (Antonelli,

Colombelli, 2011).

Therefore, knowledge cannot be analyzed in

the same way as any other productive factor

or commodity: knowledge has no fixed

capacity in terms of production of additional

units of goods; moreover, since there is no

original of good knowledge, the concept of

additional unity loses much of its value. In

other words, there is no production function

that can approximate determine the effects of

the unit of knowledge on the economic

process. And the measurement of the stock

becomes almost impossible, because one

cannot define a unit of product and there is no

criterion for determining the price of

knowledge. Knowledge is acquired on a

definitive basis, but its termination does not

entail a total deprivation by the transferor; in

turn, the buyer acquires knowledge once,

paying a price, but can use it several times

(David, Foray 2003).

In the traditional economy it is the scarcity of

the resource that helps to define its value, but

knowledge is not scarce; indeed, with its

further use compared to the vault, this is

enriched with value. Knowledge, in contrast

to traditional productive factors, is not

consumed with use, but use is a sort of

renewal and growth of its value (David 2001).

Knowledge has high initial production costs,

but low, or even zero, reproduction costs: we

could therefore say that it has its own

particular scarcity regime. That is, it is scarce

only when it does not exist, before a

discovery or an invention, but once it is

possible to obtain a first unity it becomes

abundant, because it can be replicated in all

subsequent uses.

This element creates a sort of contradiction

due to the fact that the value of knowledge is

maximized through its diffusion, with a

marginal cost close to zero, but part of this

value must return in the form of profit or rent

to the one who has produced knowledge, to

remunerate the resources originally used, and

not to lose the incentive to produce

knowledge.

Otherwise technological progress slows

down, or even stops. For this reason it is

necessary to artificially build a monopoly

regime, through secrecy, patenting, or other

kind of protection; or develop a cooperation

regime in which knowledge is freely

exchanged (Lanza 2000).

Prices do not represent an appropriate

indicator of value for knowledge; although

there is no doubt that this resource determines

a competitive advantage and can be given a

value. Complicating the scenario contributes

to the fact that much of the knowledge is not

the object of exchange, but is accumulated

within organizations, and is not, therefore,

subject to evaluation (Rullani 2006).

Knowledge is an infinitely renewable

resource, containing a potentially infinite

stock of useful value and the process of

diffusion over time and space increases this

value. For this reason it is claimed that it is a

non-scarce resource, partially non-rival and

with an opportunity cost almost equal to zero

for use. Once produced, given the content

costs of reproduction, it is possible to expand

the offer for the whole company, even if the

producer would have interest in containing

the offer in order not to lower the price. It is

also a non-divisible resource and its cost is

hardly attributable to each individual use.

In the field of knowledge, the correspondence

between costs and revenues is many imperfect



122

and this, as mentioned, determines the

emergence of externalities.

This has led us to rethink the traditional

processes of organization of the economy and

the attribution of rights: it is therefore

necessary to identify a new way of attributing

property rights, a different role of individuals

in production and consumption, a different

conception of time.

In the classical tradition the concept of

property is linked to material objects, implies

the ability to exclude those without rights

from the enjoyment of a good: but, if today

the productive force no longer resides in

traditional productive factors, but rather in

cognitive work and knowledge that it

produces, one wonders if these rules can still

be valid.

It thus clearly emerges that knowledge is a

social resource and its value depends on a

socially shared circuit, which spreads and

generates new contents. A circuit with these

characters cannot belong, and does not

belong, to a single individual. In other words,

knowledge has a much less power of

exclusion than material goods, as it is

exercised only on single phases or functions

(David, Foray 2003).

Intellectual property has the task of defining

exclusive rights and allows those entitled to

defend themselves against any disturbances.

All this reduces, at least in part, the

uncertainty of the creation process, as the

subject is given the right to property on the

concretization of the idea or principle, but not

on the idea itself, which remains the heritage

of the whole humanity.

The radical innovations in the organizational

processes necessary to produce knowledge are

more and more external to the company, and

put the interaction between knowledge and

finance at the center of attention. As already

mentioned, knowledge is not incorporated

into tangible assets and can only be enhanced

if it is transformed into financial capital

through financial markets. So the authentic

measure of the value of knowledge is Tobin's

q (Antonelli, Colombelli 2011). Recall that

this size is defined by the relationship

between the market value of the company and

the cost of replacing its capital: in other

words, it is the burden that the company

should bear to reacquire all its facilities and

plants at current prices. . Still can be represent

how the relationship between the market

value of the company purchased on the

financial market and the value of the same

company if you buy back its capital stock on

the asset market (Tobin 1969).

The neoclassical rules of income distribution,

for example, are based on the marginal

productivity of the productive factors, but

they cannot be applied in the new economic

paradigm of which we speak: in fact the new

wealth, financial, produced by the

exploitation of knowledge, is allocated to

creative workers and finance workers, even if

it is often difficult to identify the rules

governing these attributions.

THE MEASUREMENT OF

KNOWLEDGE

Measuring intangible assets is increasingly

difficult compared to the same process carried

out on tangible assets. The doctrine,

sometimes, envisages making this

measurement by attributing to the intangibles

the difference that emerges between the

company's book value and the stock market

value, with all the difficulty linked to the fact

that not all companies are listed on the stock

exchange, and that this it is mostly a potential

value until it results in a sale. Others define

some professions as associated with the

production of knowledge-based resources,

and using the employment quota in these

professions as proxies to estimate the growth

of intangibles (Webster, Wyatt 2015).

Another element that makes the measurement

of knowledge complex and extremely

arbitrary is its dependence on intellectual

capital. Human capital is part of intellectual

capital, together with structural capital and

relational capital (Mazzotta, Bronzetti 2013).

It consists of knowledge, skill experience,

intuition and is not owned by the

organizations, even if they have helped to

form it: it belongs to individuals, who when

they leave the organization carry it with them

(Sharabati, Jawad, Bontis 2010). In other

words, human capital is based on individual



123

capacities to achieve the objectives of

organizations and refers to knowledge about

the field of activity, but also to the ability of

the subject to enrich the knowledge acquired

through experience, learning and training

(Bejinaru 2016). Human capital is the central

component of intellectual capital and is

fundamental for creating structural and

relational capital (Becker, Huselid, Ulrich

2001).

Sometimes we try to make an estimate

through the evaluation of investments in

education, innovation and research, but the

traditional indicators used to assess the

performance of the economy, such as GDP,

fail to capture the fundamental aspects of the

result of the knowledge economy. Traditional

indicators cannot fully measure the

performance of knowledge because it is a

resource that is difficult to attribute a single

quantitative value.

While production and sale of tangible capital

goods are recorded in the accounts and as

turnover contributes to the production of

added value, the financial capital income,

which incorporates knowledge, is not

recorded as turnover, and does not contribute

to defining added value (Antonelli, Teubal

2008).

In the knowledge economy the valorisation of

the resource directly produces wealth to be

distributed as income, without taking the form

of revenue; and this, as already mentioned,

renders the traditional economic laws that

attribute the remuneration of productive

factors on the basis of marginal productivity

inapplicable. In this renewed scenario, the

emerging countries assume the role

previously assigned to the industrialized

countries, specializing in the production of

manufactured goods, while the countries with

advanced economics specialize, or should

specialize, in the production of knowledge.

This does not imply the end of capitalism, but

rather the start of a new form of capitalism

(Antonelli 2017).

To overcome the limits of traditional

indicators, the World Bank Institute in the

nineties has developed two indices: the KEI

(knowledge based economy index) and the KI

(Knowledge index).

The KEI considers the characteristics of the

environment, and how much this is favourable

to the use of knowledge aimed at economic

development. It is an aggregate index, which

represents the level of development of a

country in terms of the knowledge economy.

Its calculation is based on the average of a

nation's performance scores based on the four

pillars of the knowledge economy. Among the

indicators that belong to this aggregate index

we find: the tariff and regulatory barriers,

indicative of the level of economic freedom;

the quality of regulation, which measures the

impact of anti-market policies, such as price

control, and the burden on foreign trade; the

rule of law, which measures the degree of

acceptance of the rules of government by

operators, such as the perception and

incidence of criminal activities, the certainty

of laws, the respect of contracts.

The KI measures the ability of a country to

generate, adopt and disseminate knowledge. It

is therefore an indicator of the general

potential for developing knowledge in a given

territory.

It takes into account whether the environment

is conducive for knowledge to be used

effectively for economic development. The

KEI is calculated based on average of the

normalized performance scores of a country

on all 4 pillars related to the knowledge

economy (Franzini end al. 2012).

CONCLUSIONS

From the considerations made in the present

paper it is clear how much knowledge has

become and becomes daily driving force of

the economy. In this context, human capital

plays an increasingly important role, making

it possible for the growth of society as a

whole through its development. Knowledge is

therefore a strategic economic resource for

companies and for countries that want to

project themselves into history with strength

and competitiveness.



124

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