The Knowledge Economy

Tacit Knowledge in the Knowledge Society

In the knowledge economy’s environment of hypercompetivity, effective organizational knowledge transfer is critical in meeting demands for the continuous innovation of processes and products. Tacit knowledge by definition defies standard modes of codification and requires an environment of trust, proximity and strong peer support for sharing to occur—elements frequently absent in the modern organization. In this paper we describe tacit knowledge in a variety of frameworks in addition to its contemporary organizational context and examine the chief impediments to its diffusion in the organization.

The Emperor's New Clothes? Surveying Innovation in the Services Sector

It is an article of early 21st century faith that innovation results in profit, employment and prosperity.

Convinced that the future lay in Europe’s ability to innovate, by what historian Walter Laqueur calls “the false dawn of 2000” (Laqueur, 2007), the EU formulated the Lisbon Strategy and the Barcelona Objectives. The Lisbon Strategy was an attempt to overcome Europe’s low productivity and moribund economic growth through fostering innovation. Observing the economic boom in the US at the end of the millenium, Europe determined to convert itself into a “knowledge economy” with its attendant job creation. This transformation was to be accomplished by 2010. Embracing the adage, “What can be measured can be managed,” the EU also formulated the accompanying Barcelona Objectives, which set a goal for EU member states to invest a bold 3% of GDP in R&D by 2010.

So convinced were Europe’s leaders about the results to be expected from these policies that Luxembourg, for example, titled its implementation plan for meeting the Barcelona Objectives, the National Plan for Innovation and Full Employment (Plan national pour l’innovation et le plein emploi) (Government of Luxembourg, 2006).

Having set these ambitious goals, the EU was committed to tracking developments. In addition to monitoring national policies relating to RDI, the innovation survey was identified as a major instrument for measuring progress.

Traditionally, the innovation indicators used in these surveys focused exclusively on the manufacturing sector and did not include the services sector. In fact, as recently as the 1980’s, services firms were not considered to be sources of innovation. Examples of innovation indicators include tracking the numbers of patent applications and scientists employed, neither of which measures innovation in financial or logistics firms.

However, with the services sector in Western economies accounting for as much as 75% of GDP , the contributions of service companies could no longer be ignored and they began to be included in innovation surveys.

This paper looks at the progress that has been made in measuring innovation in the services sector, the impact of the OECD’s Oslo Manual and its new definitions of innovation, and a pioneering attempt at a service sector survey. It also examines certain assumptions that are being made about the nature of innovation as currently defined as well as others about linkages between innovation, employment and prosperity. Finally, the author inquires whether these surveys and indicators really provide a good measure of innovation or whether it is more a case of “the Emperor’s new clothes.”

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