The Impact of Institutional Environment on Knowledge-Based Economy

In the knowledge-based economy, the key of wealth creation is accumulation and application of knowledge in activities and the globalization process of economy. This research, on the basis of institytional economics literature v.s. neoclassical economics, aimes to examine the role of the institutional environment in realization and development of knowledge-based economy. We have examined the impact of institutional environment on the knowledge economy by using theoretical framework, empirical evidence and regression estimation. Based on theoretical literature, we have analysed institutional environment in three levels: political environment, legal environment and business environment. Then, regression results suggest that political and environment indicators have positive and significant effect on changes in Knowledge Economy Index (KEI), but the effect of business environment has not found to be significant. In general, the effect of overall institutional environment index on the KBI changes is confirmed.