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Information Society and Knowledge Economy - Essence and Key Relationships

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The paper focuses on essence and relationships between information society (IS) and knowledge economy (KE) concepts. The aim of this article is twofold. The first objective is to denominate the conceptual framework and relationships between IS and KE conceptions. The second is to present dependencies between the indexes of IS and KE development level in selected countries. Firstly, based on the notional relations between information and knowledge, there are characterized the relationships between concepts of information society, knowledge economy and knowledge society (KS). Secondly, using popular composite indexes evaluating the degree of IS and KE development i.e. Networked Readiness Index (NRI), ICT Development Index (IDI), Knowledge Economy Index (KEI) and Summary Innovation Index (SII), there were studied corelations between information society and knowledge economy in 34 selected countries in 2012. The paper concludes by stating limits and implications for further research. This work contributes to systematization and integration of knowledge about the mutually permeable conceptions of information society and knowledge economy.
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Journal of Economics and Management
ISSN 1732-1948 Vol. 20 (2) 2015
Rafał Żelazny
Department of Economics
University of Economics in Katowice
rafal.zelazny@ue.katowice.pl
Information society and knowledge economy
– essence and key relationships
Abstract
This paper focuses on essence and relationships between information society (IS)
and knowledge economy (KE) concepts. The aim of this article is twofold. The first
objective is to denominate the conceptual framework and relationships between IS and
KE conceptions. The second is to present dependencies between the indexes of IS and
KE development level in selected countries. Firstly, based on the notional relations be-
tween information and knowledge, there are characterized the relationships between
concepts of information society, knowledge economy and knowledge society (KS). Sec-
ondly, using popular composite indexes evaluating the degree of IS and KE development
i.e. Networked Readiness Index (NRI), ICT Development Index (IDI), Knowledge
Economy Index (KEI) and Summary Innovation Index (SII), there were studied co-
relations between information society and knowledge economy in 34 selected countries
in 2012. The paper concludes by stating limits and implications for further research. This
work contributes to systematization and integration of knowledge about the mutually
permeable conceptions of information society and knowledge economy.
Keywords: information society, knowledge economy, information, knowledge, ICT.
JEL Classification: D80, O11, O12.
Introduction
The concepts of information society and knowledge-based economy since the
second half of the 1990s have become the subject of broad interest of both theoreti-
cians and practitioners from many disciplines (Drucker 1993; Castells 1996;
Lundvall and Foray 1996; OECD 1996; Shapiro and Varian 1999; Karvalics 2007;
Mansel 2009; European Commission 2010). It may be worth to mention that the
Rafał Żelazny 6
pioneering work in this field have been conducted since the early 1960s
(Machlup 1962; Drucker, 1968; Bell 1973; Porat 1977; Toffler 1980). Also a num-
ber of scientific publications have been created and many projects dealing with
this subject have been completed on Polish ground (Szewczyk, red. 2007;
Żelazny 2009; Olszak and Ziemba, red. 2010).
Generally, in the literature, there are three types of approaches to the analy-
sis of the growing role of information and knowledge in economies and societies
in parallel, i.e.:
indicating the information society as the overarching object of studies,
identifying and examining only the knowledge economy,
trying to describe the phenomena in economic and social systems in parallel, at
the same time focusing upon the categories of knowledge economy and society.
Therefore, there is a whole range of conceptual proposals relating to both
information society and knowledge economy. They are sometimes accompanied
by graphic representations showing the relationship between the components of
a particular conception. In author’s opinion this rich diversity of definitions,
however, apparent, and categories of IS and KE, is often referred to as meta-
phors (Smith 2002, p. 6) or umbrella concept (Godin 2006, p. 17). Thus, there is
a gap in research on the essence and the key relationships between IS and KE.
To address this gap this research focuses on a coherent model of information
society with knowledge economy. Its creation will be possible by examining the
relationships between categories of information and knowledge, and on this ba-
sis defining correctly the conceptions of IS and KE, together with an indication
of the key feedback between them.
This work contributes to systematization and integration of knowledge on
the permeable conceptions of information society and knowledge economy.
Researchers and scholars who develop studies on IS and KE could find signifi-
cant guidelines in this paper. Practitioners can use the results of the conducted
studies in the activities undertaken for the development of elements constituting
IS and KE at the micro-, meso-, and macroeconomic levels.
This paper is structured as follows. Firstly, the paper clarifies the categories of
information and knowledge, and their mutual relationship from the perspective of
economics. Secondly, the conceptions of IS, KE and KS are defined and a scheme
of relationships between them is proposed. Thirdly, the analysis of correlations
between the four composite indexes diagnosing the level of IS and KE develop-
ment in selected countries is carried out.
The paper concludes with discussing its findings, limitations and implica-
tions for further research.
Information society and knowledge economy... 7
1. Theoretical background
1.1. Information and knowledge as economic categories
Categories such as information and knowledge, as well as relationships be-
tween them, have not yet been clearly defined in economics. Part of the econom-
ic analysis was based on the assumption of the semantic identity of the catego-
ries of information and knowledge, and the other part made clear distinction
between them.
Machlup and Mansfield apply the concept of knowledge, they reject the dif-
ferentiation of categories of knowledge and information. They claim that infor-
mation is either a metaphor (in cybernetics) or does not carry any meaning, and
true information can only come from an informant – the person who communi-
cates content (Machlup and Mansfield, eds. 1984). The definition of knowledge
proposed by Machlup (1962, p. 7) is characterized by a broad and downright
simple recognition of the term, i.e. anything that is known by somebody.
“Knowledge is both what we know and our state of knowing it. Information as
that which is being communicated becomes identical with knowledge in the
sense of that which is known” (Machlup, 1962, p. 15). He identified five types
of knowledge – practical, intellectual, small-talk and pastime, spiritual and “un-
wanted” (Machlup, 1962, p. 22-23).
Hayek (1945) used the categories of “information” and “knowledge” inter-
changeably. He argued that social knowledge “[...] never exists in concentrated
or integrated form but solely is dispersed bits of incomplete and frequently con-
tradictory knowledge which all the separate individuals possess. For him the
economic problem of society is a problem of the utilization of knowledge not
given to anyone in its totality” (Hayek, 1945, p. 519). Thus, the possession of
information (knowledge) or its lack determines the boundary conditions in the
decision making process.
Drucker (1968) focuses on knowledge which he defines as a systematic,
purposeful and organized information.
Porat uses mainly the concept of information defined as the data that have
been organized and communicated. He claims that the information is not a ho-
mogeneous good or service such as milk or iron one (1977, p 19).
On the basis of the two approaches presented above, the following conclu-
sion can be formulated, that there is a need to distinguish between conceptual
knowledge and information in economics. Information is a special kind of economic
good whose value in use is to reduce uncertainty and to fulfill the potential function
of the primary resource in relation to knowledge (Żelazny, 2011, p. 81). Whereas
Rafał Żelazny 8
knowledge is a derivative of information collated with experience and context.
Not every piece of information is or may become knowledge, but all knowledge is
(was) information. Knowledge can be the input and/or the output, it is a unique
economic good, which should be reasonably managed.
In the macroeconomic dimension these issues are reflected in the concepts
of knowledge economy, knowledge society and the intellectual capital of coun-
tries. The mesoeconomic dimension concerns the so-called knowledge sectors
and industries, and the regions of knowledge. At the microeconomic level there
are identified organizations based on knowledge, learning organizations or intel-
ligent organizations, and the so-called prosumers. In case of information – which
may not always reflect the cognitive ability, the center of gravity lies in the man-
agement of this asset in the process of making rational decisions of allocation by
consumers, businesses and a government. Due to the semantic difference in the
conceptions of knowledge and information – an alternative approach exists in the
literature that separates the two specific economics – economics of knowledge and
economics of information (Schumpeter 1942; Stigler 1961; Arrow 1962; Langlois
1985; Romer 1986; Drucker 1993; Lundvall and Johnson 1994; Stiglitz 2000;
Stiglitz 2002; Foray 2006, p. 3). The following issues are subject of studies in the
economics of information – decision-making process, imperfect information,
asymmetry of information, uncertainty and risk. The economics of knowledge
examines the role of knowledge as an input (e.g. competence) and/or the output
(e.g. innovation) in the process of management. It is said that even the whole eco-
nomic theory relates to knowledge and information (OECD 2000, p. 27).
1.2. Information society – knowledge society – information economy
– knowledge economy
In chronological order, the term information society (joho shakai, johoka
shakai in Japanese) appeared in the early 1960s in Japan. The works of T. Umesao,
Y. Hayashi, Y. Masuda (1980) and K. Kohyama indicated the importance of
information industries (ectodermic, i.e. information, communication, education
and culture), information processing and information value of goods for the de-
velopment of society. Earlier, back in 1959, an American sociologist D. Bell
used the term post-industrial society to denote society which has passed from
a goods producing stage to a service society (Bell 1973, p. 36; Rose 1991, p. 170).
In such a society, a key place in the five-sector economic structure is occupied
by sectors related to education, health, communication and entertainment as well
as banking and insurance. The central importance of a socially accumulated
Information society and knowledge economy... 9
theoretical knowledge as well as researchers and professionals in the occupa-
tional structure have been identified. In conclusion, the post-industrial society is
characterized by:
economic sector: the change from goods-producing to a service economy,
occupational distribution: pre-eminence of the professional and technical class,
axial principle: the centrality of theoretical knowledge as the source of inno-
vation and of policy formulation for the society,
future orientation: the control of technology and technological assessment,
decision-making: the creation of a new “intellectual technology” (Bell 1973, p. 14).
Interestingly, Bell (1973, p. 37) explained the reasons that determined the
choice of the term post-industrial society rather than knowledge society, infor-
mation society or professional society.
The economic point of view on the role of knowledge in economic and so-
cial development was presented by Machlup (1962). He studied economics un-
der L. von Mises and F. Hayek at the University of Vienna and introduced the
concepts of knowledge economy, knowledge industries and types of knowledge.
To Machlup (1962, p. 3-4): “[…] knowledge has always played a part in eco-
nomic analysis, or at least certain kinds of knowledge have. [...] But to most
economists and for most problems of economics the state of knowledge and its
distribution in society are among the data assumed as given”. As a result of
knowledge operationalization four elements were indicated: education, research
and development, communication and information. According to Machlup pro-
ducing knowledge will not only mean discovering, inventing, designing and
planning, but also disseminating and communicating (includes distribution). The
largest sector of the knowledge economy is concerned with distribution of
knowledge (Godin 2008, p. 13). In the knowledge economy there are six types of
knowledge producers – transporter, transformer, processor, interpreter, analyzer and
original creator. They are covered by thirty specific groups of knowledge industries.
To Machlup (1962, p. 5): “[…] now the growth of technical knowledge and the
growth of productivity that may result from it are certainly important factors in
the analysis of economic growth and other economic problems”. While formu-
lating policy issues for communication and information as a component of
knowledge he draws attention to information technologies as a source of growth
and productivity in information economy. At the time, he mainly pointed at the
improvement of decision-making process and cost savings through the use of
those technologies.
Changes taking place in technology, economic policy, industry structures,
economic theory, knowledge need to be governed and managed, and in econom-
ic issues they were identified by Drucker (1968). He called them the age of dis-
Rafał Żelazny 10
continuity in world economy and technology. Major discontinuities exist in four
areas: new technologies, the world’s economy, society and knowledge. Among
the four new industries important place is occupied by the information industry
based on computers. According to Ducker (1968): “[...] the most important of
the changes is the last one. Knowledge, during the last few decades, has become
the central capital, the cost center and the crucial resource of the economy. This
changes labor forces and work, teaching and learning, and the meaning of
knowledge and its politics”. Knowledge is being applied to knowledge itself and
it is management revolution (Drucker 1993, p. 20). As a result of these changes, it
was found that the U.S. has changed from an economy of goods into a knowledge
economy. At the same time Drucker notices that this does not simultaneously
mean the creation of knowledge society and at this stage uses the term post-
capitalist society (Drucker 1993, p. 20).
The conception of information economy and an attempt to measure the in-
formation sector in the U.S. economy presented M.U. Porat. In his opinion – “If
we are to make bold statements about the U.S. as a post-industrial society or an
information economy then it is incumbent upon us to provide at least that sum-
mary statistics” (Porat 1977, p. 18). His research object was to identify the ex-
tent of the information activity (as opposed to agriculture, industry or services)
in the total U.S. economic activity. According to Porat (1977, p. 19): “[…] the
information activity includes all the resources consumed in producing, pro-
cessing and distributing information goods and services”. He divided the infor-
mation into two major activity sorts, i.e. the primary information sector (where
information is exchanged as a commodity) and the secondary information sector
(where information is embedded in some other good or service and not explicitly
exchanged) (Porat 1977, p. 21). After multivariate calculations it was found that
the U.S. has emerged as an information-based economy. At the same time, the
special role of information technologies was highlighted which “invade” various
sectors of the economy and cause that the old arrangements may come into con-
flict with the new ones. Due to the horizontal impact of information technologies
on the overall economy, there is a need for a redefinition of information policy.
It is worth stressing that all of these conceptions drew attention to the tech-
nological dimension associated with the management of information and
knowledge in economic and social aspects. Currently, it operates under the name
of information and communication technologies (ICT). The term ICT should be
understood as a set of technologies gathering, processing and transmitting in-
formation in electronic form. The components of ICT are teleinformatic infra-
structure (computer hardware, networks – including the Internet, telephone
hardware) and software (including e-products and e-services).
Information society and knowledge economy... 11
According to Lundvall and Foray (1996, p. 14): “[...] even if we should not
identify the ICT revolution in the advent of the knowledge-based economy, both
phenomena are strongly coupled internally. [...] ICT systems provide the
knowledge-based economy with a new and different technological base which
radically changes the conditions of production and distribution of knowledge
and its coherence with the production system”. The specificity of information
and communication technologies lies in the fact that being a product of innova-
tion activity determined by knowledge, they are simultaneously – due to their utility
value – an input in the process of creating new knowledge, forming a feedback
loop of innovation – creating innovation (Żelazny 2009, p. 306). In parallel, ICT
radically change the process of information management and allocative deci-
sions by households, enterprises and government entities.
2. Research findings
2.1. Information society with or without the knowledge economy
Societies can be characterized and analyzed as complex systems within the
framework of general system theory (Soper at al. 2012, p. 119). The society
system consists of combination of subsystems. Among them the most frequently
pointed are – economic, political and cultural subsystems (Leipold 1988, p. 60;
Soper at al. 2012, p. 120). All of them should be examined holistically as a whole
of which all the parts are connected and react with each other. The social system
incorporates the economic system as a constituent part (Zafirovski and Levine
1997, p. 266). Economic order, regime, factors, processes and output can be
indicated in the economic subsystem. The political subsystem is featured by
political order, regime, culture and processes. The cultural subsystem is associ-
ated with the cultural order, i.e. religion, customs, ethical and social standards,
education system and cultural processes (Leipold 1988, p. 60). This arrangement
of relationships is penetrated horizontally with ICT, creating a network of inter-
dependence previously absent.
A fundamental challenge is to investigate the relationships between the
conception of information society and knowledge economy. Today, there are
attempts to define the relationship, though with varying degrees of success. Ac-
cording to Roberts (2009, p. 287): “[...] the term knowledge economy is used to
describe the economic structure in the emerging global information society in
which the most amazing economic success depends on the effective utilization of
intangible assets such as knowledge, skills and innovative potential”. In a similar
Rafał Żelazny 12
manner, i.e. discussing the knowledge-based economy as an element of infor-
mation society proposes Becla (2012, p. 127). A different point of view is pre-
sented by Sharma, Ng, Dharmawirya and Lee (2008, p. 151), according to whom
knowledge society is a part of knowledge economy.
Considering the presented standpoint and the previous studies of the author
(Żelazny 2009; 2011) the following model of the relationships between conceptions
of information society, knowledge economy and knowledge society is proposed.
Figure 1. The relationships between information society, knowledge economy
and knowledge society
The information society is one in which the realization of the objectives by
the citizens, enterprises and public administration is more rational through the
use of information and ICT in economic, cultural and political dimensions. ICT
radically change the way of creation, acquisition, gathering, processing and
transmission of information. The main determinant of social change in the direc-
tion of IS is to increase the role of information and expansion of ICT in all
spheres of life. The development of IS and more rational implementation of the
objectives are determined by the awareness and the ability to use information
and ICT and access to information and ICT by citizens. Among the most im-
portant factors affecting the development of IS may be mentioned:
Economic subsystem
- better information (close
to perfect)
- more rational decisions
- lower transaction costs
- lower uncertainty and risk
- higher efficiency
Political subsystem
- better information
(close to perfect)
- more rational
decisions
- higher level of civil
participation
- transparency of
government
- higher efficiency
of public admin-
istration
Cultural subsystem
- better and quicker
information
- new form of cultural goods
- new form of education and
upbringing
1. Information society 3. Knowledge society
transition of
information
into knowledge
subsystems’ borders
and information
society area
information
and
ICT
human capital
market capital
process capital
renewal capital
external
processes and
determinants:
- globalization
- technology
- policy
human capital
market capital
process capital
renewal capital
human capital
market capital
process capital
renewal capital
Information society and knowledge economy... 13
appropriate level of awareness and competence of citizens not only in ICT,
but also in the use of information and transformation of information into
knowledge in the process of making allocative decisions,
technical and economic availability of ICT,
functioning of markets for information goods on which products and ser-
vices, that can take digital form, are traded (Varian, 1988).
It is difficult to identify the point at which a society can be regarded as in-
formation society. In the literature, there are attempts to measure the level of
development in countries and regions on the basis of sets of indicators or composite
indexes describing areas important for the IS development. Among the most popular
composite indicators may be mentioned – the Networked Readiness Index (NRI)
and the ICT Development Index (IDI) (Ziemba and Żelazny 2013).
Knowledge economy can develop under the information society when business
entities transform information into knowledge, which becomes the most important
input and output as well as a source of competitive advantage. In practice, this is
reflected in the conceptions of human capital (input) and innovation (output).
A key element of this conception is the transition process of information in-
to knowledge, assigning knowledge the overarching role in relation to other
factors of production and identifying the relationship between knowledge and
innovation. According to OECD (1995, p. 3): “[...] At the heart of the old theory
(neoclassical) is the production function, which says the output of the economy
depends on the amount of production factors employed. It focuses on the tradi-
tional factors of labor, capital, materials and energy [...]. The new growth theory,
as developed by such economists as Romer, Grossman, Helpman and Lipsey,
adds the knowledge base as another factor of production”. Truly exogenous ap-
proach to the analysis of the role of knowledge (specifically TFP – total factor
productivity) in economic growth has been replaced by an endogenous approach.
In such case, the knowledge capital embodied in labor (human capital), in fixed
assets (material capital) and related to the general level of knowledge (not em-
bodied, i.e. licenses, patents, dissertations and scientific articles) is examined.
This approach to measuring the role of knowledge in economic growth, which
has been developing since the R. Solow, is called growth accounting. The know-
ledge capital is a resource, the size of which is determined by the streams – in-
vestments in knowledge, i.e. spending on research and development (R&D),
expenditure on education and expenditure on software.
Knowledge is a derivative of information, in turn, innovation is a derivative
of knowledge. The conception of innovation has emerged in economics thanks
to J. Schumpeter, although currently a slightly different approach is most often
cited. According to Oslo Manual (OECD and Eurostat, 2005, p. 46), “An inno-
Rafał Żelazny 14
vation is the implementation of a new or significantly improved product (good
or service), or process, a new marketing method, or a new organizational method
in business practices, workplace organization or external relations”. David and
Foray (1995, p. 40) note that, “[…] an efficient system of distribution and access
to knowledge is a sine qua non condition for increasing the amount of innovative
opportunities. Knowledge distribution is the crucial issue”. Innovations, being
a practical reflection of the use of the accumulated body of knowledge (not nec-
essarily scientific) are, therefore, a major determinant of economic transition
towards a knowledge economy.
A special role in the trajectory of information – knowledge – innovation
play ICT. The justification is presented below:
the use of ICT not only allows for fast and cheap access to the enormous
existing body of knowledge (including the so-called “network” knowledge),
but also, and perhaps primarily, facilitates work on innovative solutions,
which consequently contributes to reverse enlarging of knowledge stock, and
thus higher values of total factor productivity variable (TFP);
the use of ICT necessitates ongoing education, which implies an increase in
the quality of human capital and a positive effect on labor productivity;
the introduction of information and communication technologies stimulates
changes in methods of conducting business activity aiming at the improve-
ment of invested capital productivity;
the experience of previous inventions and potential of ICT suggests that pre-
viously functioning solutions and the areas in which these technologies are
applied in any case, do not form a closed list, and more should be expected,
bringing pro-productive effects.
As it is known, the economic subsystem is a component of the social sys-
tem. The process of shaping the knowledge economy would not have been pos-
sible without the primary resource – information. Thus, the knowledge economy
is part of the information society. Identifying industries, sectors or knowledge econ-
omy means that citizens involved in them are also creators of IS. Theoretically, it is
possible that under the conditions of the information society the knowledge econo-
my will not come into existence. In this case, the use of information and ICT will
improve the rationality of action, but there is no a distribution phase of knowledge
and innovation underpinning the economic and social development.
As in the case of IS, the attempts to measure the degree of KE development
are taken in two ways. There are proposed sets of indicators characterizing KE
in a multidimensional manner or developed composite indexes. The most popu-
lar examples of the latter are the Knowledge Economy Index (KEI) and the
Summary Innovation Index (SII).
Information society and knowledge economy... 15
In the knowledge society (KS) citizens, regardless of performed social roles
and age, transform information into knowledge to produce new knowledge. In the
knowledge society an individual knows how to turn information into knowledge.
Permanent learning processes and a high level of innovation are essential fea-
tures of such a society. In this case, in each subsystem huge changes have occurred
that enable production, acquisition, distribution, sharing and use of knowledge. Ac-
cording to Sharma, Ng, Dharmawirya and Lee (2008, p. 151), “Societies have for
some time organized themselves in order to achieve a healthy environment of
knowledge development, learning and sharing. Knowledge society has structures
and cultures that facilitate frictionless knowledge diffusion and sharing and it's
a sustainable learning community with an emphasis on innovation”.
In the context of this discussion, knowledge society is the most advanced
stage of a social and economic development. It is associated with the presence of
essential qualitative changes in all the areas of social, economic, political life,
science and technological progress, and interaction with nature (Melnikas 2012,
p. 674). A key role in this society will play knowledge sharing. The intensity of
this process not solely depends on human capital and ICT. It requires the pres-
ence of additional factors, which together with the human capital make up the
intellectual capital (IC).
There is no one commonly accepted definition of IC in the literature. At the
macroeconomic level – of individual nations, according to Bontis (2004, p. 14),
“The intellectual capital of a nation includes the hidden values of individuals,
enterprises, institutions, communities and regions that are the current and poten-
tial sources for wealth creation”. By modifying Edvinsson’s and Malone’s mi-
croeconomic approach to IC he proposed IC consisting of human capital and
structural capital. The structural capital consists of market capital and organiza-
tional capital, and the organizational capital consists of renewal capital and pro-
cess capital (Bontis 2004, p.15). A few years later the national IC, which uses
the following IC components, was measured – human capital, market capital,
process capital and renewal capital (Lin and Edvinsson 2008, p. 529). The hu-
man capital was defined as the knowledge, education and competencies of indi-
viduals in realizing national goals (Bontis, 2004, p. 20). The market capital is
defined as the IC embedded in national intra-relationships. It’s a peculiar social
intelligence that is determined by social networks and institutions, and it means
something more than just a social capital (Bontis 2004, p. 25). According to Lin
and Edvinsson (2008, p. 530), “[...] it represents a country’s capabilities and
successes in providing an attractive, competitive incentives in order to meet the
needs of its international clients”. The market capital is sometimes called rela-
tional capital (but in this case a social capital is distinguished). The non-human
Rafał Żelazny 16
sources of knowledge in a nation (i.e. infrastructure of national system of innova-
tion, including ICT) are comprised by the process capital. The last but not least – the
renewal capital is defined as a capability and actual investments in innovation that
sustain a nation's competitive advantage (Lin and Edvinsson 2008, p. 529-530).
In the IC studies of Poland it was assumed that the IC consists of human capi-
tal, social capital, structural capital and relational capital (The Report... 2008). The
human capital is directly related to the competences of citizens (knowledge,
skills, experience). The social capital refers to the trust, norms of reciprocity and
networks of civic involvement, collaboration skills. The structural capital infra-
structure is characterized by the national system of education and innovation,
including ICT infrastructure. The structural capital represents institutionalized
knowledge (Seleim and Bontis 2013, p. 133). The relational capital is associated
with the image of the country and its relations with the environment, its attrac-
tiveness on the global market.
In summary, it can be stated that there is a significant convergence between
the conceptions in question of knowledge society and the intellectual capital of
a nation. A high level of intellectual capital in a given country allows for draw-
ing a thesis about the presence of the knowledge society in this country.
3. Empirical analysis of relationships between conceptions
of information society and knowledge economy
In order to study the relationship between the conceptions of information socie-
ty and knowledge economy a quantitative analysis was conducted on a sample of
34 countries using the common measurements of the development level of IS and
KE. The ICT Development Index (IDI) by the International Telecommunication
Union and the Networked Readiness Index (NRI) developed by the World Eco-
nomic Forum were applied to assess the development level of IS. As the meas-
urements of advancement of knowledge economy were adopted Knowledge
Economy Index (KEI) from the World Bank and the Summary Innovation Index
(SII) from the European Union.
These measurements have been the subject of critical analysis and study, al-
so conducted by the author (Żelazny 2010; Ziemba and Żelazny 2013). One of
the main concerns relates to the use of similar, and in some cases identical par-
tial indicators in the construction of composite indexes referred to IS and KE.
For example, this is the case for IDI and KEI, in either case the following varia-
bles were used – gross secondary enrollment rate, gross tertiary enrollment rate,
number of telephones (mainlines plus mobile) per individuals, number of computers
Information society and knowledge economy... 17
per individuals or households and the share of the Internet users in the population.
These are 6 out of 11 (55%) indicators for IDI. In this context, the relationship be-
tween IDI – NRI and SII is of a greater cognitive value. Another problem relates to
delays of data receiving which impacts their incomplete comparability.
The studied countries were the EU Member States (28) and Iceland, Mace-
donia, Norway, Serbia, Switzerland and Turkey. The data for all composite in-
dexes regard the year 2012.
Table 1. IDI, NRI, KEI and SII values in selected countries in 2012
Information society Knowledge economy
IDI 2012 NRI 2012 KEI 2012 SII 2012
Austria 7.36 5.25 8.61 0.602
Belgium 7.16 5.13 8.71 0.624
Bulgaria 5.83 3.89 6.80 0.188
Croatia 6.31 4.22 7.29 0.302
Czech Republic 6.40 4.33 8.14 0.402
Cyprus 5.86 4.66 7.56 0.505
Denmark 8.35 5.70 9.16 0.718
Estonia 7.28 5.09 8.4 0.500
Finland 8.24 5.81 9.33 0.681
France 7.53 5.12 8.21 0.568
Germany 7.46 5.32 8.90 0.720
Greece 6.45 3.99 7.51 0.340
Hungary 6.10 4.30 8.02 0.323
Iceland 8.36 5.33 8.62 0.622
Ireland 7.25 5.02 8.86 0.597
Italy 6.57 4.17 7.89 0.445
Latvia 6.36 4.35 7.41 0.225
Lithuania 5.88 4.66 7.80 0.280
Luxembourg 7.93 5.22 8.37 0.626
Malta 7.25 4.91 7.88 0.284
Macedonia 5.19 3.91 5.65 0.238
Netherlands 8.00 5.6 9.11 0.648
Norway 8.13 5.59 9.11 0.485
Poland 6.31 4.16 7.41 0.270
Portugal 6.32 4.63 7.61 0.406
Romania 5.35 3.9 6.82 0.221
Serbia 5.34 3.64 6.02 0.365
Slovakia 6.05 3.94 7.64 0.337
Slovenia 6.76 4.58 8.01 0.508
Spain 6.89 4.54 8.35 0.407
Sweden 8.45 5.94 9.43 0.747
Switzerland 7.78 5.61 8.87 0.835
Turkey 4.64 4.07 5.16 0.214
United Kingdom 7.98 5.50 8.76 0.622
Source: International Telecommunication Union (2012); Dutta, Bilbao-Osorio, eds. (2012); Knowledge As-
sessment Methodology (2012).; Hollanders, Es-Sadki (2013).
To assess the relationship between the indexes measuring the degree of devel-
opment of IS and KE the corresponding correlation coefficients were calculated.
Rafał Żelazny 18
Table 2. Correlation coefficients between the selected composite indexes
evaluating the degree of development of IS and KE
IDI 2012 NRI 2012 KEI 2012 SII 2012
IDI 2012 1.000000
NRI 2012 0.915668 1.000000
KEI 2012 0.913355 0.860179 1.000
SII 2012 0.833049 0.867772 0.808 1
Source: Own calculations based on data from Table 1.
All the analyzed indexes take a strong or a very strong positive correlation
dependence. The correlation coefficient reached the highest value (0.92) for the
composite indexes which measure the degree of development of IS – NRI and IDI.
The existence of a correlation between the information society and the knowledge
economy has been confirmed, i.e. IDI and KEI (r = 0.91 very strong correlation),
NRI and SII (r = 0.87 strong correlation), NRI and KEI (r = 0.86 strong correla-
tion), IDI and SII (r = 0.83 strong correlation). Assuming that the potential devel-
opment of KE depends on a certain development level of IS, it can be assumed that
IDI and NRI are independent variables and KEI and SII are dependent variables.
The values of coefficients of determination (R-square) are presented in Table 3.
Table 3. Coefficients of determination (R square) between the selected composite
indexes assessing the degree of development of IS and KE.
IDI 2012 NRI 2012 KEI 2012 SII 2012
IDI 2012 1.00
NRI 2012 1.00
KEI 2012 0.83 0.74 1
SII 2012 0.70 0.75 1
Source: Own calculations based on data from Table 2.
The values of R square indicate that, on average about 75% of the variation of
the composite indexes, which measure the development level of the knowledge
economy, has been explained by changes in the value of the composite indexes,
which measure the development level of information society. This means that
the relationships between the conceptions of information society and knowledge
economy identified in Figure 1 have been confirmed.
4. Discussion and final conclusions
This paper attempts to identify the essence and relationships between con-
ceptions of information society and knowledge economy. The essence of these
ideas is the growing role of information and knowledge in the functioning of the
social system and its subsystems. To achieve this research objective there is a need
Information society and knowledge economy... 19
for a conceptual distinction between information and knowledge, which is reflect-
ed in the applied definitional proposal. On this basis, using the achievements of
the economics of information and the economics of knowledge, the following
analytical scheme is propounded.
The core of the concept of information society consists of information and
ICT. The role of information in the functioning of society – always important –
has dramatically increased with the development of ICT and their expansion into
all areas of life. The attainment of citizens’ objectives is becoming more rational
by creating a framework for the activities closer to the assumptions of perfect
information. Reducing uncertainty and risk, and lowering transaction costs will
improve the quality of life and economic efficiency. The information society is
an environment in which the knowledge economy can develop. For this purpose,
there should be created appropriate conditions for transforming information into
knowledge and its use in the production of new knowledge, i.e. implementation
of innovation. If this process occurs not only in economic subsystem, but more
broadly – the knowledge society will be created in the whole social system. In
this case, the information society will evolve into the knowledge society.
This trajectory has been subjected to a preliminary empirical verification
using composite indexes assessing the development level of IS and KE. In the
light of data from the 34 analyzed countries, there is a strong correlation be-
tween conceptions of information society and knowledge economy. On average,
only one quarter of changes to the value of composite indexes, which measure
the development level of knowledge economy, has not been explained by chang-
es in the value of the composite indexes, which measure the development level
of information society. Correlation analysis between selected measures of IS and
KE adopted in the article is a preliminary stage of quantitative research. The
next goal will be in-depth study using regression analysis concerning relations
described and graphically presented in the paper. Composite index of knowledge
economy in the given country will be dependent variable. Potential set of inde-
pendent variables will be composed of indicators describing process of trans-
formation of information into knowledge.
Due to the lack of data on the IC of nations, the analyses did not include
knowledge society conception. This field requires further research. It also seems
necessary to conduct in-depth work on the creation of more adequate measure-
ments for assessing the development level of IS, KE and KS which will allow
for more accurate and holistic examination of their relationships.
Rafał Żelazny 20
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