The knowledge theories and debate mentioned in the earlier section has listed some of the main views on the concept of micro, individual or at large at an organisation level, but we are also interested in the bigger picture or the “macro” concept of knowledge. It is intended to search for theories that govern the cre- ation, progress, diffusions and competitiveness of the collective knowledge be- tween individuals and firms in a nation and between nations.
The rapid telecommunications and technological advancements has trans- formed the concepts of micro, individual, within limited cities or regional knowl- edge, to a nation-wide, collective or macro-knowledge. Macro-knowledge is being created, shared and circulated by highly skilled labour force known as “knowl-
3. Reasoning and Epistemology
edge worker”. Drucker (1957) invented the term “knowledge worker” referring to a worker who’s capital is his knowledge. “knowledge workers” are focused on lifelong learning, not lifelong employments. The free movement of “knowledge workers” from one place to another has given labour an entirely different per- spective to create a new phenomenon known as “global citizens” of the world (Goldman, 1999). The international migration of highly skilled individuals with a broad range of educational and occupational backgrounds such as university students, nurses, information technology (IT) professionals, researchers, business executives, managers, and intra-company transferees or in sum “knowledge work- ers” move on a temporary basis, while others migrate with an intention to settle permanently in the host country (OECD, 2002). Murray et al. (2012), argues that the migration of large numbers of “knowledge workers” creates the “brain drain” or “human capital flight” adverse effects, which is considered as a national cost.
3.3.1
Knowledge Based Economy
Creating and keeping a high stock of knowledge workers creates the informa- tion or Knowledge Society (KSOC) (Mattelart, 2003). KSOC depends on the production, distribution and use of knowledge as the key driver of progress and wealth creation on a micro or regional levels (Quantumiii,2011). To mark, trace, measure and benefit from the efforts of all the micro levels of knowledge created between different societies, economists adapted the term Knowledge Based Econ- omy (KBE). KBE was first introduced in 1995 as a concept in a general meeting between the members of the Organisation for Economic Co-operation and De- velopment (OECD). The Canadian team introduced the title “the knowledge economy” and they had discussed the “new growth theory” and “innovation” as two major concepts constituting the establishment and progress of a KBE. The New Growth Theory (NGT) (Romer, 1989), stresses that economic growth re- sults from the rising returns associated with the creation of new knowledge. The possibility to grow the economy by increasing knowledge instead of capital or labour to generate opportunities for vast growth (Cortright, 2001).
3. Reasoning and Epistemology
ing the inner or endogenous factors for growing a healthy economy; knowledge and technological advancements, innovation, research and quality education, as crucial elements to be distributed as a common culture among the people of a society (Romer, 1991b). In accordance to the NGT theory, these factors were later articulated as 4 pillars, composed of an innovation system, an economic incentive regime, Information and Communication Technology (ICT), infrastruc- ture, and education investments. In line with NGT concept, in 1990, the World Bank (WB) shifted its long and historical stance and policies on education for developing countries from one that positioned higher education as a luxury item, to one that recognized and supported higher education as a key development priority (Robertson, 2009). To acknowledge the importance of higher education, innovation, economic incentive regime and ICT, as major pillars contributing to advancing growth and progress in nations, and in order to facilitate and help coun- tries trying to make the transition to become a knowledge based economy. The WB has adapted these four pillars and developed KBE assessment tool known as: Knowledge Assessment Methodology (KAM). The WB KAM was designed to provide a basic assessment of countries’ readiness for the knowledge economy, and identifies sectors or specific areas where policy makers may need to focus more attention or future investments (Chen and Dahlman, 2005) and (Chen and Kee,2005).
As the idea of a knowledge-based rather than a manufacturing-based econ- omy, more recently began to get a traction, the WB KAM assessment tool served the developed nations become more versatile. However, the KAM has failed in three aspects; first, before 1995, The WB was denying loans for countries want- ing to upgrade their research and higher education institutions. Such policy has left many underdeveloped and developing nations with deteriorated higher ed- ucational systems. The KAM does not in any way make up for the long term failed policy which counted higher education as a luxury item. Second, the world has progressed way beyond the four major pillars as listed in the WB KAM. Economists are now faced with a new type of economy that is based on spe- cial types or advanced digital and nano technologies. Some call it the “digital economy”, Internet economy, cyber economy, web economy or simply the new economy (Conceio et al., 2001). Third the KAM has failed to measure the com-
3. Reasoning and Epistemology
petitiveness of KBEs, as new competitors nations aren’t content to remain local because, the digital economy enabled all local economy to be global.
It is been predicted that by year 2020, the E7 group, (Brazil, Russia, India, China, Mexico, Indonesia and Turkey) will comprise a larger share of world GDP than the G7 countries (OxfordEconomics, 2011). These nations are not only producing new potential customers, they are creating new competitions.
Many emerging evidences clearly show that the WB KAM represented by the Knowledge Economy Indicator (KEI), is missing some or not covering the full competitiveness spirit that new forging nations are working towards in their pursuit to become a competitive knowledge based economy. Assuming the im- minent value of knowledge to an economy, a proper framework to measure such phenomena is needed to guarantee it is measured and administered properly.
3.3.2
Intellectual Capitals
From the gathered literature, it became clear that there were two ways to build a macro-knowledge economy. One way is through the brain power and knowledge of humans by creating and keeping high stock of knowledge workers, or Human Capital (HC). The second way is resource-based, which concerns with creating healthy economy through a combinations of country resources (tangible assets) and Intellectual Capitals (IC) (Teece, 1986). The term IC, combines the idea of the intellect or brain-power with the economic concept of capital, the saving of entitled benefits so that they can be invested in producing more goods and services. From a theoretical point of view, the term refers to measuring the real value and the total performance of intellectual capital’s components is essential for any corporate head who knows how high the stakes have become for corporate survival in the knowledge economy and information age. So, the main point is how an organization can affect the firm’s stock price using the leverage of intellect (Brooking, 1996).
IC can include the supportive infrastructure such as hardware, software patent, the company reputation etc; skills and knowledge that a company has developed about how to make its goods or services; knowledge workers or groups of employ- ees whose knowledge is deemed critical to a company’s continued success; and its
3. Reasoning and Epistemology
aggregation of documents about how they do things such as processes, customers, research results, and other information that might have value for a competitor that is not common knowledge such as customer and supplier relationships, fran- chises and licences (Rouse,2007). Just like HC, the characteristics of IC make it quite difficult to measure, and the increasing importance of research in high-tech fields to develop a KBE, supports the argument and need for adding IC measure that incorporates HC.