The effect of knowledge based economic indicators on the countries' economic complexity

Countries’ economic growth and development are significantly dependent on their productive capacity. In this research, we aimed to investigate which components of a knowledge-based economy has a more meaningful role in the production capacity. In order to measure production capacity, we used one of the most up-to-date indexes, the economic complexity index.  The research used data panel consist of the 11-year period (2016-2006) for 113 countries. By using the Principal Components Analysis (PCA), the variables of the knowledge-based economy were converted into four main indicators. The results showed that there is a positive and significant relationship between the strengthening of all of the knowledge-based economy's dimensions with economic complexity. The results showed that the most important and most influential variable on the economic complexity is the education indicator. Afterwards, institutional and economic incentives, innovation system, and information and communication infrastructure have the highest direct effect, respectively.