The Changing Nature of Firms and Governments in a Knowledge-Based Globalizing Economy

TL;DRAbstract

There are signs that the global economy is entering into a new stage of market-based capitalism which may be distinguished from those which preceded it in three main ways. First, in contrast to the land and merchant based capitalism of the pre-industrial era and machine and finance based capitalism of the nineteenth and much of the twentieth century, the capitalism of the late 1990s is becoming increasingly knowledge based1. It has, for example, been estimated that, whereas, in the 1950s, 80% of the inputs in US manufacturing industry comprised physical materials and 20% intellectual capital, by 1995 these proportions had changed to 30% and 70% respectively (Stewart 1997). No less significant, the book value of the tangible assets of corporations is becoming a decreasing proportion of their market value. One estimate (Handy 1990) puts this at between 25% and 33%, while Leif Edvinson (Edvinson 1997) has more recently calculated that, for most organizations, the ratio of the value of the

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