Knowledge Economy in Software Engineering

   
Introduction 
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The Software Engineering (SE) is certainly an excellent field to test the 
effectiveness of knowledge transferring technologies and to implement them in 
SMEs. In fact, SE, having, is based on several human-centric processes; 
consequently the human knowledge is a critical resource that needs to be 
stored, exchanged in the way to became enterprise patrimony. Moreover the goal 
to support the competitiveness of enterprises through the software needs 
continuous and frequent innovation. Finally, it is necessary knowledge exchange 
among researchers and between researchers and professionals who work in 
software companies to realize technology transfer. Moreover knowledge 
economic perspective is relevant and is, in this area, a critical aspect.  So, SE 
research allows growth and competence refining in KE. 
This work is in the above-mentioned contest and aims to the definition, 
conceptual validation, experimental validation and verification of the 
effectiveness of a set of technologies for knowledge and experience acquisition, 
transfer and reuse in order to support Open Innovation. The proposed approach 
is based on the use of a Knowledge Experience Base (KEB) for knowledge and 
experience elicitation and transfer, an Experience Factory process to continually 
improve KEBs contents and a CRM for the KEBs monitoring and evolution. 
The KE contests is explored in Chapter 2, the proposed issues will be introduced 
in Chapter 3, through the identification and description of some of the 
approaches and practices that are intended to promote the challenges posed by 
the problems identified in the previous chapter. Chapter 4 describes the 
proposed approach and in particular the developed KEB. A preliminary validation 
and application of tools is presented in Chapter 5. The work concludes with a 
discussion upon the results obtained and the identification of future 
developments. 
 
   
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2. KNOWLEDGE ECONOMY 
It is neither a new idea that knowledge plays an important role in the economy, 
nor is it a new fact. All economies, however simple, are based on knowledge 
about how, for example, to farm, mine and build; and this use of knowledge has 
been increasing since the Industrial Revolution [1]. But the degree of 
incorporation of knowledge and information into economic activity is now so 
great that it is inducing quite profound structural and qualitative changes in the 
operation of the economy and transforming the basis of competitive advantage 
[2]. 
The basic idea is that knowledge is a factor of production along with capital, 
labour, land, and other factors in determining economic growth. Globalization 
and new technologies are creating new opportunities for growth. Information 
and Communications technology speed up access and return to this knowledge. 
The result is an improved product quality, a reduced cost, a better product 
adaptation to consumer needs, as well as totally new products. The most 
advanced economies are characterized by leadership in this process.  
The importance that is given to the knowledge in the described context 
permitted us to talk about “Knowledge Based Economy” [2] and to consider the 
Knowledge Economy as a new and autonomous discipline. 
2.1. Knowledge Economy Definitions 
In [3] the term KE is used to describe knowledge-based economy in which the 
role of knowledge (as compared with natural resources, physical capital and low 
skill labour) has taken on greater importance. More detailed is the definition in 
[4] that considers KE as the economy in which the generation and exploitation of 
knowledge has come to play the predominant part in the creation of wealth. It is 
not simply about pushing back the frontiers of knowledge; it is also about the 
   
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most effective use and exploitation of all types of knowledge in all manner of 
economic activity.  
There are also some definitions that underline as the term “knowledge economy” 
is used to describe an emerging economic structure in which the economic 
success is increasingly based on upon the effective utilisation of intangible 
assets such as knowledge, skills and innovative potential as the key resource for 
competitive advantage [5].  
Many definitions are based on the idea that a knowledge driven economy is not 
just a description of high tech industries. It describes a set of new sources of 
competitive advantage which can be applied to all sectors, all companies and all 
regions, from agriculture and retailing to software and biotechnology [6].  
The knowledge society is a larger concept that just an increased commitment to 
Research and Development (R&D). It covers every aspect of the contemporary 
economy where knowledge is at the heart of value added, from high tech 
manufacturing and Information Communication Technologies through knowledge 
intensive services to the overtly creative industries such as media and 
architecture [7]. 
2.2. Knowledge Economy Drivers 
The Knowledge Economy is emerging from two defining forces [2]: the rise in 
knowledge intensity of economic activities, and the increasing globalisation of 
economic affairs. The rise in knowledge intensity is being driven by the 
combined forces of the information technology revolution and the increasing 
pace of technological change. 
2.2.1. Increasing Knowlegde Intensity 
The last twenty years have seen an explosion in the application of computing 
and communications technologies in all areas of business and community life. 
   
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This explosion has been driven by sharp falls in the cost of computing and 
communications per unit of performance, and by the rapid development of 
applications relevant to the needs of users. Digitalisation, open systems 
standards, and the development software and supporting technologies for the 
application of new computing and communications systems are now helping 
users realise the potential of the Information Technology (IT) revolution [2].  
It is in the Internet that these technologies come together, and it is the Internet 
phenomenon that exemplifies the IT revolution. Over the first decade of its 
development the Internet remained a specialist research network. By 1989 there 
were 159,000 Internet hosts worldwide. Just 10 years later, there are more than 
43 million as shown in Fig. 1.  
 
Fig. 1 Estimated number of Internet Hosts.  
Source: Network Wizards 
 
In economic terms, the central feature of the IT revolution is the ability to 
manipulate, store and transmit large quantities of information at very low cost. 
   
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An equally important feature of these technologies is their pervasiveness. While 
earlier episodes of technical change have centred on particular products or 
industrial sectors, information technology is generic. It impacts on every 
element of the economy, on both goods and services; and on every element of 
the business chain, from research and development to production, marketing 
and distribution. 
Because of the marginal cost of manipulating, storing and transmitting 
information is virtually zero, the application of knowledge to all aspects of the 
economy is being greatly facilitated, and the knowledge intensity of economic 
activities greatly increased. 
This increasing knowledge intensity involves both the increasing knowledge 
intensity of individual goods and services, and the growing importance of those 
goods and services in the economy. 
Trade data is one area in which these changes can be observed. It is in both 
goods and services trade that the relatively knowledge intensive exports are 
growing most rapidly. World knowledge service exports and trade surplus as 
share of Gross Domestic Product (GDP) between 1991 and 2006 as shown in Fig. 
2. According to the figure there is an increasing of knowledge exports and trade 
surplus and computer and telecoms service exports are the 12% of the total 
service exports.  
   
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2.2.2. Globalization  
The other main driver of the emerging KE is the rapid globalisation of economic 
activities. While there have been other periods of relative openness in the world 
economy, the pace and extent of the current phase of globalisation is without 
precedent [8]. 
The global communications revolution has been accompanied by a widespread 
movement to economic deregulation, including: 
• Reduction of tariff and non-tariff barriers on trade in both goods and 
services; 
• Floating of currencies and deregulation of financial markets more generally; 
• Reduction of barriers to foreign direct investment and other international 
capital flows, and of barriers to technology transfers;  
4,6%
1,3%
2,1%
3,1%
6,7%
2,5%
5,9%
3,7%
0%
1%
2%
3%
4%
5%
6%
7%
8%
1991 1996 2001 2006
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Exports Surplus
Fig. 2 Knowledge service exports and trade surplus as share of GDP 1991-2006. 
Source: Pink Book, GDP at market prices 
   
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• Deregulation of product markets in many countries, particularly in terms of 
the reduction in the power of national monopolies in areas such as 
telecommunications, air transport and the finance and insurance industries. 
Together all these changes have led to a rapid globalisation. 
The recent phase of globalisation is characterised by rapid increases in the flows 
of Foreign Direct Investment (FDI), capital transfers other than direct investment, 
trade flows of goods and services, and technology transfers. But two things 
stand out. First, FDI and other capital flows have grown more rapidly in recent 
years than have trade flows, suggesting that the current phase of globalisation 
is about capital movement rather than trade. Second, these flows of FDI, other 
capital, trade and technology are becoming increasingly inter-related. 
Recent trade and capital flows reveal remarkably rapid globalisation. The volume 
of world merchandise trade increased by nearly 60 per cent as a proportion of 
the volume of world GDP between 1970 and 1993, with about two thirds of the 
increase occurring after 1983. More recently, financial flows, technology 
transfers, information flows and the interpenetration of business activities have 
become increasingly significant factors.  
The rapid integration of world financial and capital markets since the early 
1980s impacts on every element of the financial systems of developed countries, 
as well as on the systems of an increasing number of developing countries. 
Financial market integration has witnessed a sharp expansion in net long-term 
lending to developing countries, a rise of foreign direct investment, and in 
international bank lending and securities financing, together with the related 
explosion of derivatives. 
Total flows of FDI from the Organization for Economic Co-operation and 
Development (OECD) countries remained broadly constant between 1970 and 
   
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1985. But between 1985 and 1990 OECD foreign direct investment flows 
increased fourfold in absolute terms and more than doubled as a share of GDP. 
Gross FDI flows from all countries to the USA amounted to US$365 billion during 
the 1980s, a more than six fold increase on the 1970s, and reached US$210 
billion in the first half of the 1990s. 
While capital flows among developed countries have increased greatly, one 
striking feature of the period from 1990 to 1996 was the sharp increase in the 
net flow of long term private capital to developing countries. Between 1984 and 
1987 inclusive, net private capital flows to developing countries amounted to 
less than US$30 billion per annum. By 1996, they had increased almost tenfold 
to US$265 billion. The ratio of net private capital inflow to fixed investment for 
developing countries in total rose from about 4 per cent in 1990 to about 20 per 
cent by 1996. According to Fig. 3 FDI flows to and from OECD countries 
increased significantly in 2006, outflows by 29 per cent to 1 120 billion US 
dollars (USD) and inflows by 22 per cent to USD 910 billion. These are the 
second-highest levels in the history of OECD, exceeded only in the boom year 
2000. 
 
   
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Fig. 3 FDI Flows to and from OECD 
Source: OEDC database 
 
These forces impact at the firm level, as firms are increasingly required to adopt 
global strategies to deal with the new realities. Global competition in all major 
markets between competitors from all major countries, the increasing 
multinational origin of the inputs to production of both goods and services, the 
growing intra-industry and indeed intra-product nature of world trade and the 
interdependent role of the various elements of globalisation are all contributing 
to a transformation of the global economy. 
2.3. Knowledge Economy characterization 
The KE is mainly characterized by the following features [2]: 
• A growing share of knowledge intangibles compared with physical capital; 
• Continues expansion of the industries related to knowledge; 
• Increasing importance of qualified work force;