The American Institute of Contemporary German Studies (AICGS) assembled a group of researchers and policy makers in Germany and the United States to identify research and policy issues posed by the transformation we have come to call the new economy. This paper, which is the product of their collaboration, focuses on three issues. The first relates to defining what exactly constitutes the New Economy. The second issue involves identifying the forces driving the expansion of the New Economy. The third issue pertains to research and policy questions posed by the New Economy. In addressing these issues, the authors generate several key findings. While a common myth is that the Internet and e-commerce constitute the New Economy, we suggest that what is new about the New Economy involves the shift to knowledge and ideas as the source of competitive advantage. There are at least four central aspects that, when taken together, constitute what we mean by the New Economy--(1) globalization, (2) the shift to knowledge and ideas as the source of competitive advantage, (3) the increased importance of regional agglomerations and clusters, and (4) the emergence of entrepreneurship as an engine of growth and development. The forces facilitating the expansion of the New Economy are technological change, especially ICT, but also institutional change, such as reforms in the financial sector. New government policies are required in the New Economy. They enable the creation and commercialization of knowledge. While this study is able to identify the importance that New Economy plays in Germany and the United States, it raises many more questions than it answers. In particular, this study argues for a research agenda that explicitly compares both the similarities and differences that shifting to a New Economy has impacted Germany and the United States, and which types of policies have proven to be the most effective in generating and coping with the New Economy.
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