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What is a Knowledge Economy

You may ask yourself what is the knowledge economy and its usage. In this article, we will show you the definition of the knowledge economy and some examples of it.

The knowledge economy is a system of consumption and production that is based on intellectual capital. The knowledge economy typically represents a large component of all economic activity in developed countries. 

It was coined in the 1960s to describe a shift from traditional economies to ones where the production and use of knowledge are paramount. Academic institutions and companies engaging in research and development are important foundations of such a system. And so are those who apply this knowledge the programmers developing new software and search engines to utilize data and the health workers who use data to improve treatments.

Examples of the Knowledge Economy

-Information Technology

Creating and operating systems that automate things and applications that people use. For example, a software developer who creates tools for organizing and exploring data.

-Business Processes

Analysis and improvement of business processes. For example, a manufacturing manager who uses management accounting to discover improvements to efficiency and quality on a production line.


The knowledge economy is based on an educated workforce whereby learning is viewed as a lifelong process. This represents a shift in education from systems that encourage memorization and conformity to education based on discovery, problem-solving and design.


Culture-related industries in areas such as art, performance art, architecture, history, and cuisine. For example, an expert in the history of an area who is involved in developing the region’s tourism industry. Culture is a vibrant area of the knowledge economy because there is little interest in automating human pursuits such as art and fine cuisine.


Marketing including promotion, product development, distribution, and sales. For example, a creative individual who designs advertisements to engage and inspire customers.

Characteristics of a knowledge economy

-Knowledge and information key driver of productivity.

-Growth in high technology investment and industries.

-Growth in knowledge-intensive service sectors such as education, communications, and information.

-Knowledge is a non-finite resource. Capital gets used up but knowledge is not limited and can be shared without losing it. In fact, sharing can help boost overall knowledge.

-Growth in demand for higher skilled labour/ University degrees.

-Increased importance of tacit knowledge – the skills and ability to implement codified knowledge.

-Innovation is driven by both producers and users (for example, open source platforms/ customer feedback) rather than top-down linear systems.

-Knowledge spillovers from one industry to another.

-Nature of knowledge economy, related to the process of globalization and global diffusion of knowledge.

-Knowledge economy and high-tech industry raise scope for increased automation of production processes leading to rapid changes in the labour market.

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