Knowledge Economy

The knowledge economy is a system of consumption and production that is based on intellectual capital. It typically represents a large component 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 or intellectual capital. However, generally accepted accounting principles (GAAP) do not allow companies to include these assets on their balance sheets.

Less developed countries tend to have agriculture and manufacturing-based economies. A developing country has manufacturing and service-based economy, and developed countries tend to have service-based economies. Most countries' economies are composed 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.

In the Information Age, the global economy has moved toward the knowledge economy, bringing with it the best practices from each country's economy. Also, knowledge-based factors create an interconnected and global economy where sources of knowledge, such as human expertise and trade secrets, are crucial factors in economic growth and are considered important economic resources.