Since the introduction of information data and communication technologies (ICT) into the economy, this type of new knowledge has been the foundation of economic development. However, the term KBE has aroused great debate in the academic world with regard to its characteristics. For the purpose of this thesis, I will consider the views of a number of authors to construct an appropriate definition to place Chile in the context of a KBE. 

            To find a suitable definition to guide this thesis, it is important to understand current explanations respecting a KBE. Since the terms introduced by the Organisation for Economic Co-operation and Development (OECD) in 1996 (Masciarelli 463), it has continued to evolve as people’s understanding of the concept of a KBE has changed. Originally, the term encompassed a neoclassical perspective, stressing the value of “information, technology and learning in economic performance” (?ledizik 68). Knowledge was seen as the principal driver of modern economies (68), and, therefore, competitive advantage would be a result of the “creation and distribution” of knowledge (68).

However, alternative thoughts on the subject of KBE give value to the “institutional, organisational and social innovation” that supports the economy. Vesela and Klimová, stress economic development cannot exclusively be a result of technology (Veselá and Klimová 414). There is a fundamental need for “educational institutions” to be participants in this transformation (414).

As a result, in this thesis, the definition take from ‘Dictionary of Trade Policy Terms’, by Cambridge University Press, will be accompanied by other understanding of the terms as it KBE encompasses many aspects. ‘Dictionary of Trade Policy Terms’ defines a KBE as: 


“An economy in which the production, distribution and the use of knowledge is the main driver of growth, wealth creation and employment, across all industries. An openness to trade, new ideas and new enterprises; sound macroeconomic policy; the importance attached to education and lifelong learning, enabling the role of information and telecommunication structure” (Goode 257).


It is important to understand that this is a very broad definition that reflects the complexity of a KBE; however, there is an awareness that these are main characteristics that have been attached to a KBE.  Moreover, these factors should result in “highly roundabout methods of production and highly customized goods and services exploiting today’s qualitatively different management tools—high-speed communications, data gathering and mining, supply chain management, customer relationship management” (Burton-Joans and Spencer 8), in order for an economy to truly be a KBE.

In addition, this thesis also acknowledges that other factors such as Foreign Direct Investment (FDI) are influential in the development of a KBE economy. According to Chandra and Yokoyama, FDI is crucial for developing nations to advance their technological development. However, this should be seen in conjunction with ‘good governance’ (Chandra and Yokoyama 23). Chandra and Yokoyama stipulate, “countries with ‘good governance’ environments tend to attract more FDI” (23).

 Goldberg and Palladini also recognise the Importance of FDI. By attracting FDI, more knowledge is integrated into a country’s economic activities (37). This is a result, of FDI “usually composed of investment capital, management experience, product design and process advances” (Goldberg and Palladini 37). Moreover, Murat Sirin, argue that FDI allows states to acquire “new technologies, develop domestic production capacities, finance new investments and create domestic jobs”, reiterating the importance of FDI (Murat Sirin 1357). The reason for this is that FDI brought in by MNCs, “produce, control and own most of the world’s technology” (Sinai and Meyer 477). This knowledge is valuable for developing nations, such as Chile, in helping develop their economy.

The term KBE has gone through a paradigm shift. Value has also been attached to the capacity of human capital and institutions to produce innovation because of the awareness that economic development cannot solely come from technology: “educational institutions need to become stakeholders in this transformation (Veselá and Klimová 414). Leydesdorff’s influential triple helix model guides the future development of KBE. The triple helix model maintains that for a KBE to be sustainable, knowledge production needs a systematic system that is supported not only by the economy but also by institutions such as universities, industry and government (Leydesdorff and Girma 789). Sabu also supports this and states that knowledge creation in a KBE should be exhanged by organisations; institutions are simulated to develop “systemic practices for managing self-transformation” (Sabau 1194). This is also noted in the ‘Dictionary of Trade Policy Terms’, which ascribes significance to “education and lifelong learning” (257). Veselá and Klimová, also acknowledge that there should be a commitment to provide investment for education, as well as technology and innovation (415), in order to sustain the advancement of a KBE.

Therefore, a KBE can be characterised by “an openness to trade, new ideas and new enterprises; sound macroeconomic policy; the importance attached to education and lifelong learning, enabling the role of information and telecommunication structure” (257). Additionally, an importance is attached to FDI and the role of governments and higher educational institutions to provide and solidify developments in KBE.