The Effects of Individual-level Knowledge on Firm Performance: An Evolutionary Perspective

Human knowledge is acknowledged as critically important to economic growth and prosperity. Economists focus on the past few decades’ emergence of a knowledge-based economy greatly dependent on individual-level knowledge. Knowledge is a key resource of many organizations, and the need for an educated workforce is believed to facilitate the creation, share, and use of firm-level knowledge going forward.
An economy where knowledge is the main asset is very different from traditional production systems that depend on tangible assets. These tangible assets often rely upon scarce resources such as minerals, thereby forcing price fluctuations and potential disruptions in inventory and sales. Logistics and supply chain issues can dwindle as we have experienced during the recent pandemic. However, when knowledge is the firm’s main asset, the firm’s intangible asset will not decrease as sales increase. Knowledge also does not spoil or dwindle over time. Instead, knowledge will grow and evolve, and as the philosopher Aristotle once stated, “the whole is greater than the sum of its parts”. The fact that knowledge as the main asset does not decrease as a result of production makes the knowledge economy an interesting phenomenon to study and to understand.