Difference between the knowledge economy and traditional economy are as follows:
1. The economics is not of scarcity, but rather of abundance. Unlike most resources that deplete when used, information and knowledge can be shared, and actually grow through application.
2. The effect of geographical displacement is diminished. Using appropriate technology and methods, virtual marketplaces and virtual organizations can be created, that offer benefits of speed and agility, round the clock operation and of global reach.
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3. Laws, barriers and taxes are difficult to apply on solely a national basis. Knowledge and information ‘leak’ to where demand is highest and the barriers are lowest.
4. Knowledge enhanced products or services can command price premiums over comparable products with low embedded knowledge or knowledge intensity.
5. Pricing and value depends heavily on context. Thus the same information or knowledge can have vastly different value to different people at different times.
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Knowledge, when formally captured into systems or processes has higher inherent value than when it can ‘walk out of the door’ in people’s heads. Human capital or human competencies are a key component of value in a knowledge- based company, yet few companies report competency levels in annual reports.
In contrast, downsizing is often seen as a positive ‘cost cuts’ measure. These characteristics, so different from those of the physical economy, require new thinking and approaches by policy makers, senior executives and knowledge workers alike.
This requires leadership, positive risk-taking against the prevailing and slow changing attitudes and practices of existing institutions and business organization.