Knowledge Economy

AAA

DEFINITION of 'Knowledge Economy'

A system of consumption and production that is based on intellectual capital. The knowledge economy commonly makes up a large share of all economic activity in developed countries. In a knowledge economy, a significant part of a company's value may consist of intangible assets, such as the value of its workers' knowledge (intellectual capital). However, generally accepted accounting principles do not allow companies to include these assets on balance sheets.

INVESTOPEDIA EXPLAINS 'Knowledge Economy'

Lesser-developed countries tend to have agriculture or agriculture and manufacturing-based economies, while developing countries tend to have manufacturing or manufacturing and service-based economies, and developed countries tend to have service-based economies.





Most countries' economies will consist of each of these three major categories of economic activity, but in differing proportions relative to the wealth of that country. Examples of knowledge economy activities include research, technical support and consulting.

RELATED TERMS
  1. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not ...
  2. Seed Stock

    An investment security that is based on shares of a publicly ...
  3. Tortoise Economy

    An economy that is growing slowly or not at all over time. The ...
  4. Black Economy

    The segment of a country's economic activity that is derived ...
  5. New Economy

    A buzzword describing new, high-growth industries that are on ...
  6. Old Economy

    A term for the old blue chip industries that enjoyed fabulous ...
RELATED FAQS
  1. What's the difference between old- and new-economy stocks?

    Old-economy stocks represent large, well-established companies that participate in more traditional industry sectors and ... Read Full Answer >>
  2. Who developed the human development index (HDI) and why?

    The United Nations Development Programme developed the Human Development Index (HDI) to create a uniform statistic to measure ... Read Full Answer >>
  3. How does expansionary economic policy impact the stock market?

    Expansionary economic policy leads to increases in the stock market because it generates increased economic activity. Policymakers ... Read Full Answer >>
  4. What goods and services do command economies produce?

    A command economy is an economic system in which the government, or the central planner, determines what goods and services ... Read Full Answer >>
  5. How can you find the demand function from the utility function?

    A consumer's budget constraint is used alongside the utility function to derive the demand function. The utility function ... Read Full Answer >>
  6. How is a market failure prevented with regard to public goods?

    It was once commonly accepted that any public good constituted a market failure and provided necessary and sufficient conditions ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    How Globalization Affects Developed Countries

    The increase in communications technology has companies competing in a global market.
  2. Economics

    How Education And Training Affect The Economy

    Education and training benefit not only the worker, but also the employer and the country as a whole.
  3. Economics

    Tankan Survey Provides Clues To Japanese Economy

    This quarterly survey is crucial for assessing Japan's economic health.
  4. Economics

    What Is An Emerging Market Economy?

    Emerging markets provide new investment opportunities, but there are risks - both to residents and foreign investors.
  5. Economics

    What is Adverse Selection?

    Adverse selection occurs when one party in a transaction has more information than the other, especially in insurance and finance-related activities.
  6. Economics

    What is a Capital Account?

    Capital account is an economic term that refers to the net change in investment and asset ownership for a nation.
  7. Economics

    What is a Fiduciary?

    A fiduciary is a person who acts on behalf of another person (or people) to manage assets.
  8. Economics

    Understanding the Fisher Effect

    The Fisher effect states that the real interest rate equals the nominal interest rate minus the expected inflation rate.
  9. Economics

    Explaining Property, Plant and Equipment

    Property, plant and equipment are company assets that are vital to business operations, but not easily liquidated.
  10. Economics

    Explaining PFIs and PPPs

    Public-private partnerships (PPP) and Private Finance Initiative (PFI) are two business relationships between government agencies and private businesses.

You May Also Like

Hot Definitions
  1. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
  2. Wash Trading

    The process of buying shares of a company through one broker while selling shares through a different broker. Wash trading ...
  3. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  4. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  5. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  6. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
Trading Center