Innovation, Learning and Clusters
Edited by Knut Ingar Westeren
Chapter 3: Growth of the Knowledge-based Economy in a Two-person Non-cooperative Game
3. Growth of the knowledge-based economy in a two-person non-cooperative game Introduction Hanas A. Cader and John C. Leatherman The last decade of the twentieth century witnessed remarkable growth in global output, technology, knowledge generation and transfer, transportation, and the proliferation of information. These changes were visible at all organizational levels from the global to the individual firm. These changes stem from one of the fundamental economic principles of our time originally articulated in the late nineteenth century. Alfred Marshall recognized that ‘knowledge is our most powerful engine of production’ (Marshall, 1890, p. 115). After 100 years, nearly all nations have embraced the concept that knowledge is an important factor of production. In Romer’s (1986, 1990) view, knowledge is the third important factor of production, while Peter Drucker (1999) argued that knowledge is the most valuable asset of a twenty-first century firm. As a result, firms have become ‘knowledge-intensive organizations’ (Florida, 1995). The significance of knowledge in production has been recognized beyond the boundaries of individual firms. As knowledge-intensive firms find, generate, use and disseminate knowledge, there are proximate, peripheral and remote beneficiaries. The degree of benefit depends on the proximity among knowledge-intensive firms. An increasing number of knowledge-seeking firms have clustered into knowledge-intensive geographic regions. These knowledge-specialized regions have been called the ‘learning region’ (Florida, 1995; Boekema et al., 2000) or the ‘knowledge-based city’ (Simmie and Lever, 2002). Alternatively, knowledge clusters can exist in the virtual world, given rise by common needs and interests and enabled through telecommunications and...
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