The present chapter deals with three interdependent components related to knowledge governance. The first one examines the effect of knowledge governance on medium term growth. Using the software industry as benchmark, the authors’ findings suggest that poor knowledge governance reduces economic growth over the medium term, but the relationship is non-linear. The second one analyzes the impact of formal institutions on economic knowledge and its related variables. In particular, the role of various governance indicators is examined. The results show that institutional quality plays an important role in the relative performance of MENA and African countries in building up the knowledge economy. The last aspect analyzed in this chapter is to establish the status of Arab economies in terms of their transformation to knowledge economies and empirically examine the impact of knowledge and its related variables on economic performance. Policy implications are also discussed.
Top1. Knowledge Governance
We examine the effect of knowledge governance on medium term growth using cross-country data over 2000-2010 for a sample of 22 Arab and African countries. From an analytical point of view, knowledge governance encompasses intellectual property rights system. Using as benchmark, the software industry, our findings suggest that poor knowledge governance reduces economic growth over the medium term but the relationship is non-linear – the rate of decrease in economic growth diminishes with poor knowledge governance. Policy implications are discussed.
The World Development Report 1998/1999 (World Bank, 1998, pp. 6-8) argues that knowledge has become the crucial factor for development, as it has become for the global economy with its implications for R&D expenditure. The creation of knowledge is expanding rapidly. Three categories of knowledge have been defined: scientific knowledge; technological knowledge and entrepreneurial knowledge. Technological knowledge includes implicit and explicit blueprints in the form of inventions. This type of knowledge is more associated with firms, and universities.
This relates to the characteristics of knowledge described as the degree to which it is rivalrous and excludable (Arrow, 1962). A purely rivalrous good has the property that its use by one economic agent precludes its use by another. Excludability relates to both technology and legal systems and thus to the possibilities of inventors to appropriate the returns of their inventions. That is the economic rationale for policy makers to provide a legal system is to avoid an underinvestment in the production of knowledge (Arrow, 1962).
A good is excludable if the owner can prevent others from using it. Technological knowledge may be perceived as a non-rivalrous, but partially excludable good due to legislation on intellectual property rights (IPRs), i.e. patenting and copyrights. Its non-rivalrous character stems from that technological knowledge is inherently different from other economic goods. Once the costs of creating it have been incurred, it may be used repeatedly at no additional cost. The marginal cost of reproducing it is zero. The IPR system is designated to increase the incentives of firms or individuals to generate new technological knowledge and introduce technological innovations.
In this paper, we analyze the impact of knowledge governance on economic growth. For that purpose, we use a cross sectional dataset for 25 countries. This paper aims to be a very preliminary effort to contribute to a better understanding of the intellectual property policies from an evolutionary developmental perspective. As such, it seeks to build a more coherent framework within which the discussions of both institution building and policy design for development can proceed. Following Burlamanqui (2010), we will label it a “Knowledge Governance” approach and suggest that from a public policy/public interest perspective, and within an evolutionary framework, it is a better way to address the problems concerning the production, appropriability and diffusion of knowledge.
Knowledge governance is a multidimensional concept and a very broad term. From analytical perspective, it encompasses intellectual property rules. Intellectual property rights are a necessary institution for the enhancement of the social capability to generate new technological knowledge. That is to guarantee the access to knowledge. Notice that this knowledge governance is also one of the components in the KEI developed by the World Bank: the economic incentive regime. This component includes as an important aspect the IPRs protection regime.
Without an adequate IPRs protection, creators will have little confidence in appropriating their returns. Poor knowledge governance might also influence the incentives to innovate. Further, weak IPRs systems might also signal weaker formal institutions, and thus affecting economic growth. Thus, the link between knowledge governance and economic growth is a key question that deserves further consideration.