from Keith Smith: What is the �knowledge economy�? >>>>>>> Before moving to a discussion of knowledge in industry, it is necessary to make a diversion via the concept of �high-technology�. In much policy analysis it is common to use the terms 'high-technology' or 'knowledge intensive industries' in a somewhat loose way, as though in fact they are both meaningful and interchangeable terms. But we ought to remember that the term �high technology� is a rather recent invention, and that its meaning is far from clear. The standard approach in this area rests on a classification developed by the OECD in the mid-1980s.12 The OECD distinguished between industries in terms of R&D intensities, with those (such as ICT or pharmaceuticals) spending more than 4% of turnover being classified as high-technology, those spending between 1% and 4% of turnover (such as vehicles or chemicals) being classified as medium-tech, and those spending less than 1% (such as textiles or food) as 'low tech'. In fact the OECD discussion of this classification was rather careful, and offered many qualifications. Chief among these is the point that direct R&D is but one indicator of knowledge content, and that technology intensity is not mapped solely by R&D. Unfortunately the qualifications were forgotten in practice, and this classification has taken on a life of its own; it is widely used, both in policy circles and in the press, as a basis for talking about knowledge-intensive as opposed to traditional or non-knowledge-intensive industries. This is a serious problem, since the OECD classification as it is used rests on only one indicator, namely intramural R&D. This is open to two important objections. First, it is by no means the only measure of knowledge-creating activities. Second, it ignores the fact that the knowledge that is relevant to an industry may be distributed across many sectors or agents: thus a low-R&D industry may well be an major user of knowledge generated elsewhere. This issue will be discussed in a more empirical manner below. Even so it is not clear that this classification helps us, even in a limited analysis of trends. One great problem is that in fact the high-tech sector thus defined is small, and there are therefore some difficulties in arguing that it is driving the growth process. In the OECD, for example, the USA has the largest share of high-tech in manufacturing, but this is only 15.8% of manufacturing output, which in turn is only 18.5% of GDP. So the high-tech sector is less than 3% of GDP. It is hard to see how either the direct or indirect impacts of such a small component of output could have a significant effect on overall economic growth. Most discussions of the role of high-tech are conducted in terms of share analyses, or even share-of-share analyses. This can easily confuse matters. In virtually all of the OECD economies the share of high-tech in total manufacturing has risen in the longer term, and this is widely used as an argument for the claim that such industries are central to growth. However this is complicated by the fact that that the share of manufacturing in total output has been in long-term decline. So between 1980 and 1995, the high-tech share of US manufacturing increased from 10.5% to 15.8%, while the share of manufacturing in GNP decreased from 21.6% to 18.5%; what this actually implies is that the share of high-tech manufacturing in total GNP rose over fifteen years by well under one percentage point.13 It is not uncommon to see quite sweeping claims made for the high-tech sector which are not supported by available evidence. For example, OECD�s �Knowledge based Economy� claims that �Output and employment are expanding fastest in high-technology industries, such as computers, electronics and aerospace�.14 But the OECD�s own �Scoreboard of Indicators� actually shows long-term negative growth rates of employment in high-tech manufacturing in eleven of fifteen OECD countries for which data are presented (including the USA, where high-tech employment declined at a faster rate than manufacturing employment generally). Such problems have not led to any questioning of the high-tech/low-tech distinction. On the contrary, the high-medium-low-tech approach has recently been extended, to divide the medium-tech category into medium-high and medium-low technology industries. Such classificatory manoeuvres cannot, however, alter the fundamental limitations of the category, and ought to cause us to question the identification of knowledge intensive and high-tech industries. notes: 12 See OECD, OECD Science and Technology Indicators, No 2: R&D, Innovation and Competitiveness, (OECD:Paris), pp. 58-61. 13 All of the data here is drawn from OECD, Science, Technology and Industry, Scoreboard of Indicators, 1997.<<<<<< ---------- Keith Smith: What is the �knowledge economy�? Knowledge-intensive industries and distributed knowledge bases. Abstract The economics of innovation has always focused on learning, just as public policies for science, technology and innovation have always been aimed primarily at creating and diffusing knowledge. In recent years such policies have attracted increased attention as a result of claims that knowledge-intensive industries are now at the core of growth, and that we are now entering a new type of knowledge-driven economy or even a completely new form of �knowledge society�. But what do we mean by �knowledge�, and what does it mean to speak of a �knowledge-intensive� industry or a �knowledge-based� economy? The objectives of this paper are firstly to examine what various authors mean by the concept of a knowledge economy or learning economy. Four broad approaches are outlined and assessed. They are: � the belief that knowledge is quantitatively and in some sense qualitatively more important as an input to production. � the idea that knowledge is in some way more important as a product than it has been hitherto - that we are seeing the rise of new forms of activity based on the trading of knowledge products. � the view that codified knowledge (as opposed to tacit, person-incorporated skills) is in some ways more significant as a component of economically-relevant knowledge bases. � the idea that the ICT revolution implies a fundamentally new role for knowledge in economic processes. The paper then uses CIS data to describe some empirical dimensions of knowledge creation in Europe, and then turns to concepts and a methodology for mapping the knowledge base of an economic activity, with a view to a more nuanced understanding of the meaning of 'knowledge intensity' in production. The paper argues that it is important to turn from direct indicators of knowledge intensity in production, to an approach based on what the paper terms �distributed knowledge bases� which have a more systemic and institutionally diffuse location. Knowledge for many key activities is distributed among agents, institutions and knowledge fields, and the problem is to understand the embodied and disembodied knowledge flows between them. Empirical examples of such knowledge bases are described, in the offshore oil and gas sector and the food processing industries. The paper concludes by discussing how such �distributed knowledge bases� might affect our conceptions of the knowledge economy (and the roles of ICTs within it), and links this to current policy challenges. 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