Stiglitz, 1999; World Bank, 2003), a phenomenon referred to as the “knowledge economy.”
Knowledge—unlike commodities—can be used multiple times and by more than one person
without losing value, and it has marginal distribution costs. These facts open the possibility of
an economic production factor with compounding rather than diminishing returns. The
production, distribution, and use of new knowledge and technological innovations have been
major contributors to increased productivity, the upgrade of physical capital, and the creation
of new, high-value-added jobs. Increases in human, institutional, and technological
capabilities are, in turn, major sources of new knowledge and innovation which then feed
economic growth. From this perspective, technological innovation and new knowledge are
both the engine and the product of economic growth. Consequently, investments in research
and development and technological innovation can create new knowledge that spawns a
virtuous cycle of growth.