DESCRIPTIVE FACTS REGARDING THE KNOWLEDGE ECONOMY INDICATORS

1.1. Trends

The current literature in business, academia and market analysis has identified the following trends and opportunities, that stakeholder never benefit from. Technology that facilitates the shift out of survival mode and enables businesses to focus on business expansion has become more important.

• For small businesses, this means increased use of collaborative tools, improved net­working and implementing disaster recov­ery plans. Medium businesses, as well, are focused on more effective collabora­tion among employees. However, this will come in the form of more enterprise IT solutions such as Customer Relationship Management (CRM), Enterprise Resource Planning (ERP) and server virtualization.

• Substantiated marketing messages with more quantifiable information will be re­quired to drive ICT purchases beyond basic break/fix purchases. Because of the economic downturn, business decision­makers (BDMs) are much more involved in the purchase process of ICT. Companies will require stronger justification for ICT purchases, and in a language, BDMs can directly translate into bottom line results. Phrases such as “save time” and “save money” will need to be heavily supported with hard numbers and proof of outcome.

• Cloud computing solutions (Morgan Stanley, 2011) will struggle to capitalize on the full market opportunity presented in the upcoming years. Adoption will con­tinue to climb in the near future, but mar­keters will need to reduce confusion, mis­information and apprehension in order to convert interest into actual purchases.

• The next following years will continue to see accelerated adoption and mainstream­ing of key technologies like Cloud com­puting and Virtualization, as cost savings, operational efficiency and IT disaster re­covery are key business drivers.

• Social media will move beyond its primary role as a promotional tool into the strategic role of business intelligence.

Businesses will continue to adopt digital mar­keting media to reach customers, and as usage of social media grows so will the advantages and opportunities for companies to capture valuable competitive feedback. Although the number of companies using social media as a source for business intelligence is small, it will grow sig­nificantly in the next few years as the value of the tool becomes more obvious.

In the next upcoming years, companies will continue to find new ways to gain visibility in day-to-day operations in a non-technical, non-IT assisted manner. Business intelligence (BI) has been traditionally under-utilized by companies compared with large enterprises, and with mas­sive amounts of data assets lying around in these smaller companies, organizations are realizing that they can use existing data resources better to gain clear line of sight into their business and customers for timely decision-making. In order to focus more on business growth and results, and not just internal efficiency and cost control companies are now using BI tools. These trends are illustrated by the following facts.

1.1.1. Percentage of ICT Sector Value Added

For the EEE countries the percentage of ICT sector value added in the past ten years has almost the same tendency as the European Union as a whole, with an average of around 6% of GDP. Although the trend is positive, there is a clear downturn due the financial crisis period, most of the countries being affected by the economic recession.

O’Mahony, Timmer and Ark (2007) show that the potential for a recovery in productivity growth will to a large depend on the EU’s capability to transform the economy towards an economic engine that makes more productive use of its re­sources with an intensive use of ICT investments in service industries.

1.1.2. Gross Domestic Expenditure on R&D

Consider the relative shares of the different sources of funds in R&D. More specifically the indicators provided are percentage of GERD (Gross domestic expenditure on R&D) financed respectively by industry, government, the higher education and the private non-profit sector (Table 1). The fifth source of funds shown, which also make the breakdown complete, is GERD financed from abroad. R&D is an activity where there are significant transfers of resources between units, organisations, sectors and countries. The importance of the source of fund­ing has been recognized in one of the Barcelona targets of the Lisbon agenda where it is said that the appropriate split for R&D is 1/3 financed by public funds and 2/3 by private ones.

Table 1. Gross domestic expenditure on R&D(% on GDP)

The empirical evidence identifies knowledge as an important source of economic growth (Acs, Audretsch, Braunerhjelm, & Carlsso, 2012) where the results of this study emphasize the importance of policies that not only promote R&D investments, but also take the role of spillover mechanism into account. Most countries followed a similar trend along the years.

Gross domestic expenditure on R&D for EEE countries is between 0.5% and 2% of GDP, for the period 2000-2009, and the data are similar to those from Arab countries. According to the latest data from World Bank (2005), the value of this indicator for Arab region is 0.85% of GDP, a value comparable to the EEE region.

1.1.3. Researchers

Researchers are professionals engaged in the conception or creation of new knowledge, prod­ucts, processes, methods and systems, and in the management ofthe projects concerned. Head count (HC) data measure the total number of research­ers who are mainly or partly employed on R&D.

The number of researchers has an upward trend in almost all the considered countries. The high­est number is held by Poland, followed by Czech Republic, Hungary, Romania and Slovakia, only normal relative to the country population.

For the Arab countries, although there are data availability issues, the World Bank reports show also an upward trend in terms of number of researchers in the past decade.

1.1.4. Turnover from Innovation

This indicator is defined as the ratio of turnover from products new to the enterprise and new to the market as a % percentage of total turnovers. It is based on the Community innovation survey and covers at least all enterprises with 10 or more employees. An innovation is a new or significantly improved product (good or service) introduced to the market or the introduction within an enterprise of a new or significantly improved process.

A clear upward trend is presented only in Hungary and Portugal, while Slovakia presents a downward trend.

1.1.5. Venture Capital Investments

Venture capital investment is defined as private equity raised for investment in companies; man­agement buyouts, management buying and venture purchase of quoted shares are excluded. Data are broken down into two investment stages: Early stage (seed and start-up) besides expansion and replacement (expansion and replacement capital).

1.1.6. High-Tech Exports as % of Exports

This indicator is calculated as share of exports of all high technology products of total exports. High Technology products are defined as the sum of the following products: Aerospace, Computers- office machines, Electronics-telecommunications, Pharmacy, Scientific instruments, Electrical machinery, Chemistry, Non-electrical machinery, Armament. The total exports for the EU do not include the intra-EU trade.

As it can be easily observed from the data, Hungary, Czech Republic and Estonia are on top of all EEE countries.

If we consider the values of this indicator, there is a similarity between the Arab World as a whole and EEE countries, but there is a significant difference between the EEE countries and Arab countries. Nour (2005) shows that Arab countries don’t have enough financial and human resources to promote a development policy based on research and development, this fact being one ofthe causes of the lagged development.

1.1.7. Employment in High and Medium-High-Technology Manufacturing Sectors

The data shows per country the employment in high and medium-high technology manufactur­ing sectors as a share of total employment. Data source is the Community labour force survey (CLFS). The definition of high and medium-high technology manufacturing sectors is based on the OECD definition (itselfbased on the ratio of R&D expenditure to GDP).

Once again, a similar pattern of behaviour can be noticed for all EEE countries, less Slovakia.

For Arab countries, there is a persistent gap between the skills acquired at university and the requirements of business (O’Sullivan, Rey, & Mendizi, 2011). Enterprises often cite lack of suitable skills as an important constraint to hir­ing: according to the World Bank’s Enterprise Surveys. Firms identify labour skill levels as a major constraint in Lebanon (38% of surveyed firms), Syria (36%), Jordan (33%), Mauritania and Egypt (31% in both countries).

1.1.8.

The data show per country, the employment in knowledge-intensive service sectors as a share of total employment. Data source is the Community labour force survey (CLFS). The definition of knowledge-intensive services including high- technology services used by Eurostat is based on a selection of relevant items of NACE Rev. 1 on 2-digit level and is oriented on the ratio of highly qualified working in these areas.

For all the countries in EEE region there is a positive trend in employment in knowledge inten­sive service sectors, as drivers for development.

As a comparison, in Arab countries the gen­eral rate of unemployment is high, and as the population increases, youth unemployment also continues to rise.

The Arab region has the highest rates of un­employment in the world and a growing deficit of knowledge in both new and traditional forms as claimed in several studies. These insist also on the unemployment rate ranges from 56% in Gaza to 15% in Oman, and the rate of unemployed youth as a percentage of the entire population sits between 39.5% in Morocco (1999) and 75.4% in Bahrain (1995). In Iran, youth account for 70% of a population of more than 66 million, but youth unemployment has other national and global impacts, notably increased violence, crime, drug use, poverty and political instability. In addi­tion, the rapid rate of urbanisation in many Arab countries has increased levels of youth-specific unemployment, due to the lack of skills required in urban employment compared to that practiced in rural activities.

1.1.9. Human Resources in Science and Technology

Human resources in science and technology (HRST) are an important feature in the new para­digm of knowledge economy: as the investments in high-tech technologies increases, there is an increase in demand for skilled labour force. In Eurostat methodology this fact is measured by the percentage of the total labour force in the age group 25-64, that is classified as HRST, i.e. having either successfully completed an education at the third level in an S field of study or is employed in an occupation where such an education is normally required. HRST are measured mainly using the concepts and definitions laid down in the Canberra Manual, OECD, Paris, 1995.

The trend is increasing for all countries, be­cause they had to adapt to e-governance require­ments by the EU, before and after accession.

1.1.10. Doctorate Students in Science and Technology Fields

In the European Union, according to Eurostat defi­nition, a key indicator for knowledge economy is the proportion of doctoral students in science and technology fields. The methodology takes into ac­count the students participating in second stage of tertiary education in science and technology fields of study, as a percentage of the population 20-29 year old. This indicator includes the total number of students in tertiary programs which leads to an advanced research qualification (ISCED level 6), in the educational fields Science, Mathematics and Computing and Engineering, Manufacturing and Construction. The levels and fields of education and training used follow the 1997 version of the International Standard Classification of Education (ISCED97) and the Eurostat Manual of fields of education and training (1999).

For the period 2000-2009, all the countries in EEE region exhibit a significant increase in the number of students enrolled in doctoral programs in the field of science. For example, the propor­tion of doctorate students ranges between 0.1% in Bulgaria to 0.85% in Czech Republic.

For the Arab countries, there are no specific data available for this indicator, yet there are data regarding the proportion of student enrolled in tertiary education. From the point of view of this indicator, there is an increasing trend, from almost 20% in 1999 to 28% in 2009.

1.2.