Sustainable Knowledge Economy Index

Abstract

The global economy has evolved into the knowledge economy in which intellectual capital is the critical engine of economic growth. Knowledge economy mostly represents the consumption and production activities in the developed countries in which the developing and less-developed countries are striving to achieve. However, to strive for a knowledge economy alone will result to tradeoff with the agriculture sector. This descriptive quantitative study attempts to come up with a Sustainable Knowledge Economy Index (SKEI) in which the production outputs and intellectual capital of the developed countries are integrated. The Principal Components Analysis method was utilized to reduce 26 variables into fewer dimensions so that the developing and less-developed countries can easily infer from. Results show that of the two components extracted (institutions and skills for innovation) account for the 71% of the total variance in the SKEI. Among the developed countries, the United States of America ranks first, while the least performing developed country is France. Hence, a developing or less-developed country should strive to have at least a 2.50 (score for France) Sustainable Knowledge-Economy index for it to achieve long-term competitiveness.