Enriching the indicator base for the economics of knowledge

This chapter addresses the issue of the development of indicators aimed at providing a measurement base with both breadth and depth from which research in the "economics of knowledge" can benefit. While initial attempts at quantification in the area of the knowledge economy were based on both national accounting (Machlup 1962) and growth accounting (Abramovitz and David 2001), the use of indicators with a direct bearing on knowledge (Jaffe and Trajtenberg 2002) is becoming the dominant approach. There is no summation (or composite value), as in accounting, but rather a collection of available statistics on several dimensions of knowledge, such as scientific and technological knowledge, innovation inputs and outputs, and organizational practices. The strength of this latter approach is that, depending on the quality of the indicators, it allows a genuine grasp of the phenomena of knowledge and innovation under consideration. The economics of knowledge is now at the point where it has the potential to become a strong, empirically disciplined science, depending on whether enough progress can be made on developing the underlying data and the indicators ensuing from them. This chapter argues that the economics of knowledge is at a crossroads, and it uses the development of knowledge management indicators as and illustration of this.