The key distinctive feature of knowledge economy/society is the power and respect knowledge and creativity are enjoying in all spheres of public and private life. However, it is often disregarded that this is only possible in a trully democratic environment.

Is that the case in most countries around the world? Unfortunately, not, and therefore everybody concerned with education should use their influence to make this happen, because youngsters must grow in the right spirit, as they will be entering their working and political environment.

An element of key importance in higher education is the relationship between knowledge, competences and skills. In the past centuries the task of universities was to prepare the future societal elite - who needed proper »culture«, knowledge, and manners. And now the elite are those who are most knowledgeable and competent in performing their function – and not almost half of 25-34 year olds with university degrees. Most universities around the globe (much less in North America, and less in several Asian countries) still follow the traditional system of heavy curricula and lots of ex-cathedra lecturing, with strong focus on presenting students with knowledge, science and theories. Unsurprising, this leaves very little time for building students' competences and skills. Of course, this has to change, also because employers expect it (saying, we need people with the right attitude - the specific knowledge they need in the company will be given to them there).

There are two additional challenges universities are now facing: first, as organisations they have evolved from “professorial self-governing bodies” into “complete organisational actors” – capable to develop and deploy organisation-level strategies. The second challenge is being expected to become key players in the knowledge economy – with potential to contribute to good policy making, which comes with their important position in society.

In modern times universities evolved first in Europe some 10 centuries ago, serving a clear task to offer higher education to a very limited part of young people, and receiving for that even the Pope’s blessing – provided the curricula included philosophy and theology. In the USA in 1862 the federal government allotted to states’ governments the needed land to develop public universities, being aware that progress requires educated and qualified people.

After centuries of discussions on the nature and structure of curricula among advocates of more practical approach and those insisting on the traditional role of university, gradually a new, second type of university developed – one focussed on applied sciences, and usually not offering doctoral studies.

Germany is usually accredited for playing an important role in developing the two clearly differentiated types of university: the first often referred to as the “Humboldt” model (strongly academic and linked to research), and the “Flexner” model (focussing on practical knowledge and competences required at the labour market).

Centuries later the two models of university survive and co-exist: the numbers of the first and the second are: in Holland 14 vs. 41, in Finland 13 vs. 22, and in Austria 39 vs. 21. Indeed, it is good for students to have an option to choose, whether they wish a more academic profile, or to be professionally better prepared for the type of job they intend to perform.

In the US, education – including post-secondary – is generally much more practically oriented, and among some 4,000 post-secondary institutions of all types, only about 150 are classified under applied sciences. In Asia and Latin America the influence of the US system is noticed.

In Japan an important shift has taken place some 20 years ago: the government has cut public funding of universities for about 10%, and even university presidents’ salaries had to be reduced. The message from the government was, that universities should obtain more funding from those who need their services – primarily from the business sector. The results were rather modest and recently further cuts have been announced.

There is an ongoing crisis of public funding of universities in several countries around the world, indicating that many governments still underestimate the contribution post-secondary education makes to building human capital needed for knowledge economy. And probably also since many universities remain victims of old-fashioned academism, asking governments only for funding, and refusing to discuss with them conceptual and programmatic issues.

The knowledge economy is an economy in which knowledge, creativity and innovation are recognised as the primary drivers of economic growth. This economy is relying on innovation-based efficiency in the production, distribution, and use of knowledge and information. Modern higher education therefore prepares individuals to think critically, analyse information, and solve complex problems. It also teaches them how to communicate effectively, work collaboratively, and adapt to constant changes. These skills are essential for the quality of human capital in the knowledge economy, where the ability to innovate and adapt to new technologies and ideas is crucial.

In the knowledge economy, higher education institutions play a critical role in the creation and dissemination of new knowledge. They also serve as incubators for new ideas and start-up companies, which are critical for economic growth. At the same time, however, higher education institutions face in the knowledge economy many challenges. The rapid pace of technological change and globalization has increased competition in the contemporary higher education market. Universities must adapt to changing student needs and demands for flexible learning options, including online and blended learning. They must also develop new models for financing higher education, as traditional sources of funding, such as government grants and tuition fees, are becoming less reliable.

Universities face new challenges in the knowledge economy, as they have taken on new missions in addition to teaching and research. To succeed in the knowledge economy, higher education institutions must focus on innovation and collaboration. They must develop new and innovative models of teaching and learning that incorporate new technologies, and meet the needs of a diversified student population. They must also work with business partners to develop programs that align with their needs and provide graduates with the skills needed to succeed in the quickly changing job market and technologies.

Universities are expected to educate the brightest young people, and prepare them to be informed citizens, with successful careers, and eventually assuming leadership roles in for-profit, non-profit, and government organisations. Their departments produce new knowledge enriching the education of future generations, and underpinning technological progress. As the global economy has become more knowledge based, a third stream of activities has been added to these traditional roles: outreach to the community and companies, and technology transfer to help stimulate economic development and a prosperous society. In addition to balancing these three roles, HEIs are making a variety of other contributions to the knowledge economy.

Higher education has a very important role in preparing young people for the knowledge society/economy, but most universities around the globe are still not fully aware how to fulfil this role effectively. Undoubtedly, this is an urgent task for university leaders, while authorities and many societal actors can exert a positive influence upon and support universities in this transformation. At the same time many governments need to interact with universities more intensely for the purpose of making stronger contributions towards building knowledge economy. The important governments’ role is to propose – and after intense public debate – select and energetically pursue the adopted development strategy priorities. By accomplishing this, they will upgrade the national efforts in strengthening the sustainable international competitiveness.

Academia as a whole has to be more active in the process of building knowledge society – specially by pushing for the important role of the innovation ecosystem. The problem is, that the academic community itself also has not yet fully acknowledged the changes in innovation process, bringing important new tasks for the university, as well for the government. This is clearly reflected in two phenomena: slow adaptations in curricula and methods of teaching, and very limited inclusion of practical experts into the teaching process. Best universities around the globe do exactly the opposite, and achieve corresponding results.

The more active role of universities is quite essential for the success of knowledge economy and society. The respectful status of universities implies also their obligation to contribute in properly defining the key targets and help in raising public awareness about what is to be done to build knowledge society and economy, and properly present what benefits are to be expected for everyone.


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S. Marginson, Higher Education in the Global Knowledge Economy, Procedia - Social and Behavioral Sciences.
M. A. Peters, Knowledge Economy, Development and the Future of Higher Education.
N. Durazzi, The political economy of high skills: higher education in knowledge-based labour markets.
Education at a Glance 2022.
Universities in the knowledge economy | University of Cambridge.
Universities in the Knowledge Economy.
Finegold, D. (2006). The Roles of Higher Education in a Knowledge Economy.