The knowledge-driven economy
A Department of Trade and Industry case study

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Page 3: The importance of knowledge

Department Of Trade And Industry 5 Image 5The four key reasons why knowledge is becoming more important are as follows:

1. Information and Communications Technology (ICT)

Today information spins around the world quicker than ever before with entirely new products and services such as digital TV, laptop computers and global positioning systems. Production methods have also been transformed. Electronic commerce and the information highway have made it easier for organisations to do business with each other, transforming the ways in which customers, suppliers and competitors interact.

2. Science and technology

There has been a faster rate of growth in scientific and technical knowledge in recent years. Older technologies have been replaced by integrated approaches such as Computer Aided Design and Manufacture (CADCAM) with the electronic transfer of information. Fundamental advances have additionally taken place in areas such as genetics and biology where new generations of products have been created.

Although such developments have expanded the stock of knowledge and increased the pace of innovation, it has also led to imitation. In these situations tacit knowledge is particularly important as organisations monitor their external environment and respond to the challenges created by scientific and technological change.

3. Global competition

Lower communication and international transport costs, the opening up of new markets and expanding market size have increased the number of global competitors. This has enabled businesses across the world to take advantage of economies of scale to improve their competitive advantage. The pace of globalisation in the world economy has increased considerably since the 1980s. The effect of greater competition and the faster pace of innovation has been to advance the movement towards the concept of the knowledge-driven economy.

4. Changing demand

People today have rising incomes and changing tastes. As people purchase more sophisticated goods and services and value their leisure time more highly, a smaller proportion of their income is spent upon essential goods. People also place more emphasis upon the values of the organisations from which they buy, reflecting their approach to the environment as well as the quality of their goods and services.

Department of Trade and Industry | The knowledge-driven economy