Causal modeling of knowledge‐based economy

Purpose – The purpose of this paper is to show how research on knowledge‐based economy (KBE) has increased noticeably in recent years. However, while some literature is available on construct model and validity analysis, little information is available on causal model. Design/methodology/approach – This work used the Knowledge Assessment Scorecards of World Bank, applying the linear structural relation model to address the causal model of knowledge‐based economy. Findings – The results found that an open innovation system was the key to the knowledge‐based economy competitiveness, and the effective information technology and excellent human resources were over the economic environment. Research limitations/implications – This work is a cross sectional analysis that considers the causality between different KBE endowments. However, focusing on specific group by longitudinal analysis should be further considered. Moreover, this work addresses the causality between different KBE endowments; however, the proposed model did not compare the differences between the different countries, regions, and socioeconomics. Practical implications – This work suggests that every country should construct an open national innovations system, and that not only focuses on the participated public and private sectors but also expands to relative economic structure, regime, and various social cooperation networks that help effectively improve collective learning and knowledge innovation. Originality/value – This work used the 2005 KAS comprising a set of 80 structural and qualitative variables that benchmark how an economy compares with its neighbors, competitors, or countries. The comparison is undertaken for a group of 132 countries that include almost all of OECD economies and about 90 developing countries. Moreover, this work used the path analysis with observed variables (PA‐OV) model under the LISREL to address the causality between different KBE endowments. Overall, this work proposed some important conclusions and suggestions.