Shandre M. Thangavelu and Toh Mun Heng
The term 'new economy' seems to mean different things to different researchers, 1 but, no matter how the new economy is defined, growth in the new economy will be driven by technological innovation and scientific progress. Developments in information and communication technologies (ICTs) are clearly the most important 'new' elements of recent economic growth in the 1990s, and have led to other innovations such as the greater role of networking in the new economy. ICTs are seen as important developments in the new economy, but some of their impacts might not have occurred without broad changes in national innovation systems 2 in the world (OECD 2000).
Based on the most recent data, the most important trend in the new economy is the rising share of investment in research and development (R&D). In most Organisation for Economic Co-operation and Development (OECD) countries, overall investment in R&D rose in the 1990s. In 1997, overall R&D expenditure 3 in OECD countries was nearly US$500 billion, nearly 2.2 per cent of the overall OECD gross domestic product (GDP) (OECD 2000). In addition, the composition of the R&D expenditure is changing towards more business-funded and market-oriented research: the business-funded R&D expenditure relative to overall OECD GDP was nearly 1.6 per cent in 1998 (OECD 2000).
Like OECD countries, East Asian countries are redefining their economic structure, particularly in terms of innovation and technological development, which are seen as being of paramount importance for long-term growth in these countries. The key elements in the new economy are the creation, absorption and dissemination of knowledge; these elements are clearly emphasised in the economic structures of the East Asian countries as they face new internal and external challenges in the global economy.
The new economy has engulfed not only the OECD countries, but also the East Asian countries. The 'miracle growth' driven by trade and foreign direct investment (FDI) in the 1970s and 1980s raised the standard of living in these countries and integrated their economic structures in the global economy.