Advancing the Knowledge Economy: Key Pillars and Innovations

1. OECD/NSF Conference on Advancing Knowledge and the Knowledge Economy  National Academies, Washington DC 10-11 January 2005 OECD Work on Knowledge and the Knowledge Economy by Berglind Ásgeirsdóttir, OECD Deputy Secretary-General

2. Recent OECD Projects on Knowledge and the Knowledge Economy • The Growth Project aiming at identifying the factors determining growth • The economic impacts of ICT investments • The role of job-related training • Knowledge management • Measurement and indicator development • Human and social capital investments and returns

3. First Conclusion: “Good “economic fundamentals”are important for stimulating the knowledge economy Good “economic fundamentals” such as • Stable macro-economic labour policies that allows long-term planning; • Well functioning labour, product and capital markets; • Efficient training policies that help ensure that the low-educated are equipped with the right skills, thus avoiding “knowledge divide”; • Competition policies, which drives down the costs of technologies; • Liberalisation of telecommunication policies; • Openness of trade and foreign direct investments to let in “new ideas”. are important for stimulating the knowledge economy

4. Second Conclusion: The development of the knowledge economy is dependent on four main “pillars”: innovation, new technologies, human capital and enterprise dynamics Knowledge Economy Highly-skilled Globalisation R&D Internet MNEs New Technologies Enterprise Dynamics Human Capital Innovation Economic Fundamentals

5. First pillar: Innovation:R&D growth driven by industry structure Percentage point increase in business R&D intensity as a share of GDP by industry sector, 1990-2000 Source: OECD ANBERD Database

6. Second pillar: new technologies:ICT capital to GDP growth (in percentage points)The US and small EU countries have had a large impact of ICT investment, France, Germany and Italy a small one(contribution to GDP growth, in percentage points) Source: OECD Productivity Database, May 2004.

7. Third Pillar: Human Capital: Population that has attained at least upper secondary education (2002)

8. Third conclusion: Globalisation is a pervasive factor that affects all four pillars of the knowledge economyR&D share of foreign affiliates/total Business and R&D Source: OECD, STI Outlook, 2004 based on Carrodo et al, 2003.

9. Fourth Conclusion: New social, organisational innovations, and knowledge management practices as well as social capital have to be developed to deepen the benefits of the knowledge economy • The “softer” social and organisational changes are in many cases very important for the development of the knowledge economy • The adoption of new work practices and the presence of labour-management institutions tend to facilitate the take-up of new technology • Knowledge management practices seem to have effect on innovation • Social capital in the form of networking and trust can help realise innovative environments • Increasingly countries will have to think about how education promotes effective participation in communities of knowledge; and this will include social and moral competences as well as technical ones.