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Overview Knowledge Based Economy Malaysia Commerce Essay

Paper Type: Free Essay Subject: Commerce
Wordcount: 3300 words Published: 1st Jan 2015

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Knowledge is defined as information combined with experience, context, interpretation, and reflection (Davenport et al., 1998). Knowledge defined as objects, concepts that are assumed exist around in people in same interest areas. Knowledge is commonly distinguished from data and information (Zack, 1999). Data is a kind of raw data which does not directly meaningful. Raw data refers to a collection of numbers, characters, images or other outputs from devices to convert physical quantities into symbols, which are unprocessed. Such data after further processed by human will become meaningful which is information. In addition, knowledge is result from interpreted information, understandings of combination of data and information, expertise, and skills which acquired by a person through year to year experiences.

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Further, knowledge can be tacit or explicit (Lave & Wenger, 1991). For tacit knowledge, it is personal, context-specific knowledge that is difficult to formalize, record, or articulate, it is stored in the heads of people (Tiwana, 2000). Tacit knowledge is not available as text, it is difficult to express to others. It involves human personal beliefs, experiences, and values. For explicit knowledge is that component of knowledge that can be codified and transmitted in a systematic and formal language, documents, database, webs, e-mail, charts, etc (Tiwana, 2000). In contrast, explicit knowledge is more precisely and formally articulated, it can be transferred to others in a relatively straightforward manner. Explicit knowledge considers is the most important factor of production in knowledge economy.

What is the knowledge economy? “A knowledge-driven economy is one in which the generation and exploitation of knowledge play the predominant part in the creation of wealth” (United Kingdom Department of Trade and Industry, 1998).

Knowledge economy also defined as economy of knowledge which focused on the production and management of knowledge. From the past, neo-classical economics has only focused on production of labour and capital as their main factor. Nowadays, neo-classical economy getting transform into knowledge-based economy by start replacing capital and energy into information and knowledge as their primary wealth-creating assets. In the words of Dr. Mahathir: “In our pursuit towards developing the K-economy, knowledge has to replace labour and capital as the key factors of production in our economy. The challenge for Malaysia is to develop this knowledge amongst our citizens so that our success will be due to the contributions of Malaysian talents and knowledge workers” (Dr. Mahathir bin Mohamad, Putrajaya 8 March 2001 advertisement in the New Straits Times 13-04-2001).

As we enter the 21st century, Malaysia’s economy is currently changing into knowledge based economy since announcement a long term project called Vision 2020, which was a plan turn Malaysia to a fully developed country and knowledge rich society through the development of ICT sector. According to Mahathir “some have wondered why 2020 and not some other year. As a doctor I am attracted to the optometrist measurement of vision; 2020 indicates 100 per cent good vision in both eyes. Our 2020 vision for Malaysia implies this clear vision of where we want to go and what we want to be” (Mohamad, 2007).

To achieve the objectives of Vision 2020, shift Malaysia economy into knowledge-based economy to increase rapid rate of economy growth and enhance international competitiveness is very important. The knowledge based economy will be the main key point to strengthen Malaysia’s capability to innovate, create and design own indigenous technology, develop and launch new products in the market. In addition, the knowledge will be key factor contribute to Malaysia’s economy growth and able to achieve sustainable gross domestic product growth rate as well. Moreover, our previous prime minister Dr. Mahathir Mohamad said “during the Eight Malaysia Plan period, we will be faced with even greater challenges from globalization and liberalization as well as the rapid development of information and technology. We will have to shift the growth strategy from being input-driven towards one that is knowledge-driven” (Abdulai, 2004).

Therefore, Malaysia has integrated the development of Knowledge-Based Economy concept into its new vision policy in order to achieve our Malaysia Vision 2020. Malaysian were encouraged to improve the quality of education and training to learn highly skilled and knowledgeable manpower in order to support the development of a knowledge-based economy. To develop a Knowledge-Based Economy as a “strategic move to raise the value added of all economic sectors and optimizing the brainpower of the nation: and 2). “strengthening human resource development to produce a competent, productive, and knowledgeable workforce.” (Abdulai, 2004).

Besides, Malaysia government has been high involved in this process shift Malaysia towards Knowledge-Based Economy by set up institutions, infrastructures, and infostructures that will help move the country towards a KBE with the launching Multimedia Super Corridor (MSC) and National IT Agenda (NITA) organized by Malaysia government. The objectives to launch this project is formulate strategies and promote the utilization and development of IT, the key enabler of a knowledge-based economy by create an ideal IT and multimedia environment as well as enable Malaysia to be in the mainstream of activities necessary to attract knowledge workers, technopreneurs and high-technology industries.

Furthermore, there are some academic researchers studying Knowledge Management and Knowledge-Based Economy development in Malaysia. A major effort is the book Malaysia and K-economy (2001) by a number of academics of the Multimedia University of Malaysia. Also, a number of local studies on some ICT developments which related innovative practice are also reported in the Proceedings of the Asia Pacific Economics and Business Conference 2002 (UPM). There is also a paper measures knowledge-based economy achievement through the skilled labor contributions to Malaysian manufacturing sector productivity growth (Elsadig et al, 2003). This studies trying to prove that Knowledge-Based Economy really contributed to a developed country in various sectors development such as manufacturing sector, ICT sector.

As we know, the transformation towards Knowledge-Based Economy is started in Malaysia. Many organizations realize the important knowledge that will affect an organization operation future. Knowledge will play important role factor of affect organization production rather than the labour workforces, capital. Nowadays, knowledge management is not just used in ICT government sector, it also widely used in private hospitality industry. In this service industry, knowledge is very important in order to provide latest information which customer require immediately. With knowledge, they able to help customer solve difficult problem in limited time constrain due to every minute of time is equal to money of customer. In addition, we know that some industries have facing high turnover work force. Recruit new staff to take over the job position is not always the effective way. Therefore, they are only depending on past documentation which is explicit knowledge left by previous staff. Yet, it is difficult to transform tacit knowledge into documentation as references for future used. That’s why the important of learning knowledge management there are. There is an example in below:

” In an industry where there is highly turnover, knowledge management also helps bring our staff up to speed quicky and we achieve the learning processes documented and disseminated quickly.” (Cherly, 2008).

As the growing demand for knowledge-based products and services is changing the structure of the global economy, the role of knowledge in achieving competitive advantage is becoming an important management issue in all sectors.

The gap between a company’s market value and its tangible asset value is widening; the key variable explaining this gap is a firm’s stock of knowledge. Unlike land, labor, and capital – the economist’s traditional, finite factors of production – knowledge and ideas are infinite economic goods that can generate increasing returns through their systematic use (Kim & Mauborgne, 1999). Though there little consensus as to what knowledge actually is, many do accept that knowledge is a primary competitive factor in business today (Dzinkowski, 2000). A survey conducted by the Canadian Institute of Chartered Accountants (CICA) shows that the top executives of both the Canadian Financial Post 300 firms and US Fortune 500 firms view knowledge resources as critical for a firm’s success.


Knowledge is defined as information combined with experience, context, interpretation, and reflection (Davenport et al., 1998). Knowledge is commonly distinguished from data and information (Zack, 1999). Knowledge is believed and valued on the basis of the meaningfully organized accumulation of information through experience, communication, or inference. Knowledge can be viewed both as a thing to be stored and manipulated and as a process of simultaneously knowing and acting – that is, applying expertise (Blackler, 1995).

Instead, Knowledge is not only embodied in goods and services, particularly in high technology industries, but also it is a commodity itself, manifested in forms such as intellectual property rights or in the tacit knowledge of highly mobile key employees. Knowledge includes information how the way to interact as individuals as community. Knowledge unlike land, labor, and capital – the economist’s traditional, finite factors of production – knowledge and ideas are infinite economic goods that can generate increasing returns through their systematic use (Kim & Mauborgne, 1999). It is a public good and sharing with others involves zero marginal cost. Though there little consensus as to what knowledge actually is, many do accept that knowledge is a primary competitive factor in business today (Dzinkowski, 2000). In addition, technology breakthrough based on knowledge creates technical platforms that support further innovations and drive economic growth (Bank Negara, 1999). The table below will show the framework categories of knowledge:


As the growing demand for knowledge-based products and services is changing the structure of the global economy, the role of knowledge in achieving competitive advantage is becoming an important management issue in all sectors. Therefore, the rapid creation and dissemination of knowledge and information is very important to the organization. If knowledge is not properly maintained, information could become misconstrued or vanish all together. When information is stored within individual minds, the maintenance of this knowledge becomes more complex. The retrieval and distribution of information are the most important aspects of organizational memory. Individuals must be motivated in order to retrieve and communicate information. A major problem within many organizations is the fact that employees view knowledge as a method of securing their jobs and are reluctant to share their knowledge with others. Nowadays, many organization and enterprise are realizing how important to make maximum use of knowledge among their staff. These knowledge can be database knowledge, work past experiences, human knowledge based. It is hard to keep track of and make use of all of the parts knowledge. The organization interest to know what are the knowledge assets and how to use and manage this knowledge asset to get high return in the future. Most of the organization in Malaysia only focused on labor, capital and tangible asset as their primary knowledge assets. They are loses sight of knowledge Management as their primary important knowledge assets. Only, few organizations fully realize the benefits from highly valued knowledge.

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However, organizations getting change, evolution, view knowledge management as part of their business strategy. Due to organization found that, to success in increase competitive marketplace is fully depends on the quality of the knowledge by how to apply it in the business process. Knowledge management has also been described for its possible role in creating sustained competitive advantages for organizations (Grant, 1996; Johannessen & Olsen, 2003; Lado & Wilson, 1994). Such as apply knowledge on low cost leadership strategy by the way of cut cost, lower the product price, reduce or eliminate steps in the manufacturing process that are unnecessary or duplicated process cycle in order to have a unique characteristic to differentiate form the competitor. This is the way how to apply knowledge in cost leadership strategy and differentiation strategy into business field to gain competitive advantages in the competition marketplace. Knowledge management not only the benefits of reduced costs and cycle time, but also develop valuable knowledge that anticipates of future buyer/seller behavior. Besides, knowledge management apply on innovation-based differentiation strategy to create new innovation product to able differentiate from competitors to gain competitive advantages.

However, there is a challenge of deploying the knowledge assets of an organization to create competitive advantage such as the marketplace is increasing competitive and the rate of innovation, knowledge should be evolve and process at even faster rate by an organization in order to catch up with the trend of the market. Moreover, knowledge takes times to experience and acquire. An organization does not have enough time to provide this kind of knowledge management training and increase formal knowledge management to the staff. Leading loss of knowledge due to staff retirement earlier is one of the reasons. The experience from the retire staff may not be transfer the tacit knowledge to the fresh staff. It is difficult to request experience staffs turn their tacit knowledge into explicit knowledge which is documentation form for references use in future. Sometimes, changing in strategy direction may result in the loss of knowledge in a specific area. For instance, a subsequent reversal in policy may then lead to a renewed requirement for this knowledge, but the employees with that knowledge may no longer be there.

A variety of factors have been shown to have an important effect on the ability of organizations to acquire sustained competitive advantage, including the relative capability development of a firm (Johannessen & Olsen, 2003), and a firm’s ability to differentiate its products (Johannessen & Olsen, 2003; Teece et al., 1997). Research on KM and competitive advantage has emphasized ‘description, rather than empirical study’ KM can lead to such an advantage (Holsapple & Singh, 2001; Ndlela & Toit, 2001).

The current competitive environment is driven largely by the emergence of the knowledge society, where as Drucker has described (Drucker, 1992), organizations move from productivity based on “make and move” to one based on “knowledge and service”. The emergence of this “knowledge era” is radically changing what creates value in organizations, whereby the long-term viability and prosperity of an organization increasingly depends on its management’s ability to leverage the hidden value of its intangible assets.

Resource-based has emerged as a key competitive priority in many organization activities including corporate strategy (Clemons, 1991), information technology capability (Mata, Fuerst,&Barney, 1995), and KM. Resource-based is defined as the resources and capabilities possessed by competing firms that may differ, and these differences may be long lasting (Barney, 1991; Rumelt, 1984; Wernerfelt, 1984). From the resource-based perspective, knowledge management researchers have identified various KM related resources that serve as potential source of competitive advantage. For example, Gold et al. (2001) notes that technological resource, structural resource, and cultural resource are rate and firm specific and therefore likely to serve as sources of organizational capability.

Along with competent KM skills, Lee and Choi (2003) point out that the relationships between knowledge enablers (culture, structure, people, and technology) and organizational performance. Likewise, in fostering research agenda of knowledge management, Grover and Davenport (2001) and Okunoye and Karsten (2002) describe the strategy, structure, culture, and technology as the primary sources of its business growth and improved competitiveness. Furthermore, an organizations with strong social KM resources are able to (1) integrate the KM and business planning processes more effectively, (2) develop reliable and innovation applications that support the business needs of the firm faster than competition, (3) predict future business needs of the firm and innovate valuable new product features before competitors. The social KM resources ability to encourage the multifaceted activities associated with the successful implementation of knowledge management has been found to be a key distinguishing factor of successful firms (Lee & Choi, 2003).

In fact the wide difference in competitive organizational and economic benefits that companies acquire from KM has been attributed largely to their social KM resources (Lee & Choi, 2003; Miller &Shamsie, 1996). KM resources are complex to gain and difficult to imitate when there is individual. To achieve competitive advantage through Knowledge Management, organizations have also learned how to combine effectively their KM resources to create an overall KM capability.


We were more understanding about what Knowledge is, how knowledge important to contribution economy growth, how knowledge management benefits to the organizations and how knowledge management may be appropriately viewed as an organizational capability.

Before we started, we have done many researches about what actually Knowledge-Based Economy is. We also found out how Malaysia started to change towards Knowledge-Based Economy, what is the main factor to have this Knowledge-Based Economy evolution. Since introduction of the Seventh Malaysian Plan (1996-2000), it is the effort towards shifting Malaysia to a knowledge-based economy. That’s why it is important to understand the readiness of Malaysian higher educational institutions to support knowledge-based economy.

In addition, the contributions to the development of the Malaysian Knowledge-based economy have come largely from the government policy makers, management consultants and businesspersons. It proved that knowledge play an important role to change our country, society from traditional to knowledge-based.

In conclusion, the challenge of globalization and a knowledge-based era has made it vital for Malaysia to move towards a Knowledge Based Economy. Knowledge Based Economy will present the ways to achieve sustainable rapid growth and remain globally competitive in the medium and long term and it will brings up our country towards Vision 2020 and turn Malaysia to a fully developed country and knowledge rich society.


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