ECONOMIC DEVELOPMENT QUARTERLY
CAN KNOWLEDGE
DRIVE YOUR
LOCAL ECONOMY?
BY PAUL TERO
ABSTRACT
This article examines how you can leverage the
knowledge economy to improve outcomes for your
local economy. Building on the understanding of
what the knowledge economy is through theory
and examples, the conditions and process for
successfully creating a “local knowledge economy
cluster” are discussed.
DEFINING THE KNOWLEDGE
ECONOMY
Fig 1: Factors of the Knowledge Economy. (Source: Author)
Concerning the knowledge economy, consider this:
an increase in the number of patents in your local
economy will lead to a proportional increase in
your economic growth. As will an improvement in
the quality of education (all levels), the number of
scholarly articles published by those that work in
your area, and, unsurprisingly, the level of royalty
payments that are collected by organisations that
are situated locally. Distribution: the second factor, the distribution of
knowledge, is about letting others know about
what is known. Yes, it is through formal university
lectures and in the TAFE classroom, but distribution
of knowledge also occurs in the context of business
networking activities and through social media
platforms.
Also consider the effect of knowledge on
employment. For every skilled job in the tradable
sector, another 2.5 jobs are created in the non-
tradable sector. And for every high-skilled job in
high-tech manufacturing, another 4.9 jobs are
created in the non-tradable sector. Application: thirdly, the application of knowledge.
This is where people use knowledge to develop
innovations. Whether these innovations be new
products or improved business processes, the
important outcome is that something new has been
developed because of what has been learnt.
So, what is the knowledge economy? In essence,
the knowledge economy is the production,
distribution and application of knowledge. And with
knowledge becoming ever more critical to business
and economic success it is important to understand
these three factors. Another way of putting all this about the knowledge
economy is this; There is a relationship between
your community’s “knowledge-base” and its capacity
to generate and utilise economically beneficial
innovation. That the growth of your local economy
is linked to a continual improvement to the stock of
knowledge held by your citizens. As one economist
put it: “long-run growth is driven primarily by the
accumulation of knowledge by forward-looking,
profit-maximizing agents”.
Production: the production of knowledge is just that.
It’s the creation of new understandings about any
aspect the world in which we live and the ways we
do things. Not only is it about the quintessential
scientific discovery in say medicine, but it’s also
about insights from the soft sciences like economics
and psychology.
Let’s pause to consider one implication of these
last two paragraphs. Do the conditions exist in your
local economy for people in general, and those in
VOL.12 NO.1 2019 | 14