There are fundamental differences between knowledge and other physical assets. Knowledge is permanent. The seller continues to retain it even after selling. Knowledge is cumulative. It has increasing returns to scale. The more knowledge is produced and used, the higher the price it fetches. Knowledge is fungible. It cannot be hidden. It is interactive. Scientists, Professors and workers in the knowledge industry cannot work in isolation.

Economists, administrators, academicians, entrepreneurs, accountants and managers are used to dealing with physical assets and understand their importance and correlations through quantities, wages, prices, profits, etc. They understand the importance of education; yet they find it difficult to evaluate knowledge, it being abstract and subjective.

Managing knowledge is a process, which involves a multi-period decision framework, starting from investments in research and development to diffusion of knowledge to creation of innovations and finally capturing value through commercialization of inventions and innovations. The whole process is ridden with uncertainties and difficulties in managing the complexities.

The public policy challenge confronting governments is to design programs and systems that would reduce uncertainties for the firms and at the same time promote co-operative development. USA, Europe, Japan and some other industry-focused countries have attempted to deal with these issues and uncertainties. The same is true of a number of MNCs. Information Technology MNCs are showing increasing evidence of co-operative and collaborative behavior.

Information Technology is a knowledge intensive industry, critical to India’s growth and development. While most of the programs designed to promote industrial development failed to produce world-class firms in most industrial sectors, investments in higher education in 1950s and 1960s provided impetus for the growth of Indian IT firms. The Department of Information Technology of the Ministry of Communications and Information Technology has sponsored this project with a view to focusing on policies and strategies for the future suited to the emerging knowledge economy.