The “knowledge economy” is a widely popularised, misunderstood, yet crucial concept. It is visible by many indicators, such as increases in patenting, spending on research and development, and the accelerating pace of technological change (Stevens 1998: 87). Most importantly, in most industries continual research and development is the key to staying competitive in global markets. This is clearly most difficult to do in less-developed countries where there is little money available to invest in the necessary infrastructure and education required for research and development. Yet it is also the most crucial in those countries if they are to lift themselves out of monetary and technological dependency on the developed world. My approach draws from the notion that policy related to the global economy should be based on the principles of that economy (which is increasingly driven by innovation). These principles and significant empirical results suggest that there is little hope for countries to significantly gain from inward foreign direct investment (FDI) (O’Brien and Williams 2004: 189). Instead, governments should do all they can to invest in domestic innovative capacity in order to actually receive significant value added (James 1994: 159).

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