Handbook on the Knowledge Economy
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Handbook on the Knowledge Economy

Edited by David Rooney, Greg Hearn and Abraham Ninan

This fascinating Handbook defines how knowledge contributes to social and economic life, and vice versa. It considers the five areas critical to acquiring a comprehensive understanding of the knowledge economy: the nature of the knowledge economy; social, cooperative, cultural, creative, ethical and intellectual capital; knowledge and innovation systems; policy analysis for knowledge-based economies; and knowledge management.
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Chapter 20: How to be Productive in the Knowledge Economy: The Case of ICTs

Greg Hearn and Thomas Mandeville


Greg Hearn and Thomas Mandeville The knowledge economy has a number of defining features (Rooney et al. 2003), namely: 1. 2. 3. it is characterized by progressive waves of innovation; products and services have pronounced externalities; and production involves compound multidisciplinary knowledge regimes. Productivity in the knowledge economy is therefore affected by these factors as much as by traditional issues of cost minimization and control of resources. For example, Arthur (1996) has argued that knowledge industries often have dynamics that approximate natural monopolies. For a start they tend to have high research and/or development costs but relatively low variable costs. Their products are often ‘heavy’ in knowledge but ‘light’ in material; hence they enjoy extraordinary profit margins per unit cost. In addition they often exhibit network externalities. This means that the advantages of using a particular product accrue not solely from the characteristics of the product but from the fact that other agents are also using that product (Leff 1996). The significantly different dynamics which operate within sectors dealing with intangible knowledge products and services highlight the need for a different approach to thinking about productivity for strategic managers, policy-makers and those interested in industry development in these sectors. Information and communication technologies (ICTs) illustrate these dynamics clearly and therefore are an important exemplar of general issues in knowledge productivity. In this chapter, we will examine productivity issues in the deployment of ICTs and then develop a general model of the management of different knowledge regimes in the productive process....

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