The conventional view of the knowledge economy based on high technology industries and frontier technologies, like biotech and nanotechnology, presents an incomplete picture. Don't overlook the significance of low and medium technology industries in services and manufacturing (eg. food processing, transport, financial services, timber and metal products) that are innovative, knowledge-intensive and growing steadily.
In Australia, like most advanced economies, high technology or science-based industries and the technologies underlying them are very important, but they are also very small. Such high technology industries account for only around 3 per cent of GNP in most OECD economies.
More significant to our understanding of the knowledge economy is the way innovation and growth occurs in the low and medium technology sectors, which form the bulk of the economy in Australia and in the OECD. These sectors include food processing, metal products, chemicals, timber products, printing and publishing, transport, mechanical engineering, mining, the hospitality industry, financial services, health and the like.
Innovation in such industries is not based on investment in research and development, but on the painstaking development of new product concepts that either solve consumer problems or meet market demands. The reality of innovation is that it rests not on scientific discovery, but on learning and problem-solving by firms.