Modern economic development is to an important extent determined and driven by the emergence of the knowledge economy (Jorgenson, 2001). Advances in technical and organizational knowledge have been identified as key drivers of economic growth. Access to knowledge is generally recognized as a key condition for innovation, improved standards of living, and international competitiveness (Jones, 2002). This seems to imply that there is something new about growth being based on knowledge, as if knowledge is more important today than in the past. While this may be true, it may very well be misleading. It has long been the consensus among economists who have studied the problem that long-term growth is always based on the growth of technical and organizational capabilities (Chandler, 2000).

However, according to Peter Howitt (1996), what is new about knowledge from the economist's point of view is that we are now beginning to incorporate it into our framework of analysis. Even more importantly, we are dealing with knowledge not as an extraneous outside influence but as one of the main factors whose evolution we seek to explain as the outcome of economic forces. Although many of the ideas of the new growth theory go back to writers such as Joseph Schumpeter, it is only with the work of Paul Romer (1986) and Robert Lucas (1988) that economists were able to incorporate these ideas into simple dynamic, stochastic, general equilibrium models.