The phraseknowledge economyis used in several ways in policy and popular discussions. For the purposes of this report, we first recognize knowledge as “. . . collected human expertise within a particular domain . . .” (Collins, 2007). It is neither raw data nor information, which can be viewed as processed data. We then follow the World Bank’s definition that an economy becomes knowledge-based when the sustained use and creation of knowledge are at the center of its economic development process (Chen and Dahlman, 2005). In a knowledge-based economy (KBE), knowledge is the basis for decisions made by...

In this chapter, we present an overview of a KBE, with a focus on its various constituents. We first start with a description of the pathways of knowledge in an economy. As depicted in Figure 2.1, a knowledge economy involves the creation, acquisition, dissemination, and utilization of knowledge.

Knowledge can be created in an economy through research and development (R&D), education, and learning on the job. R&D primarily increases the quality of machines, or physical capital, while education primarily increases the quality of labor, or human capital. Knowledge is also generated through the interaction of these two types of capital,...

The various conceptualizations of a knowledge economy discussed in Chapter Two identify human capital as an important ingredient apart from the physical and institutional structure. This highlights the importance of achieving a balance between the ICT infrastructure and human capacity to best exploit the opportunities that infrastructure offers. The INSEAD eLab Skills Pyramid (Lanvin and Fonstad, 2009) offers a three-tier view of the skills that matter most for a knowledge economy: literacy and basic skills in tier one (such as math, science, and IT literacy), occupational skills in tier two (such as programming, architecture, and e-business skills), and global knowledge...

While GCC countries have made great strides in establishing an ICT infrastructure (physical capital), which is an essential prerequisite for a KBE, they need to look beyond infrastructure to other complementary factors—such as human capital and the requisite institutional and regulatory environment. The GCC countries, however, face challenges to ensuring the availability of these complementary factors. In Chapter Three, we presented data to support this theme by examining KBE indices developed by various organizations, focusing on thecomponentsof these indices. Without these complementary inputs and a balanced knowledge ecosystem, an economy cannot fully exploit its ICT infrastructure. Here,...