Knowledge   Knowledge       Knowledge   Knowledge    Knowledge
Base         Producer         Inventor    Transferer      Consumer
                       Figure 1. The model of knowledge flow                  
Because it can acquire, share, spread and obtain, clearly different from the traditional production factors, knowledge can be used by different people at the same. What’s more, the more the knowledge is used, the better its value can be exploited. So the solution to the maximization of knowledge lies in the spread and flow which in turn depends on the elements of knowledge base, distribution network and knowledge consumers. But cost is required in the course of accumulation, innovation, discovery, distribution, and flow of knowledge. In the word, the flow of knowledge is decided by the capital flow, which in turn is decided by the development of industry.  That is to say, the flow of knowledge is closely related to the industrial structure.
2.2 The model of industrial structure evolution
An industry is an aggregate of the enterprises in the similar business lines. The industrial structure refers to links and the ways of links between the industries. The study of industrial structure is to classify these relations and the evolution of the structure so as to promote the economic development. As is seen from the development of the developed and industrial countries, the evolution process of the industrial structure appears as one from the simple structure to the advanced structure. Generally speaking, the primary product industries like agriculture and traditional service, at the first stage of the economy, makes a major part of the economy, while manufacturing, in the second stage, constitute the core of the economy. Similarly, the service industry with info-technology as its lead makes the major proportion of the whole industry. The development pattern in a link form (Agriculture ---) manufacturing---service industry) indicates the growth path of the industrial structure; the evolution pattern of the industry structure is a linear pattern. Our purpose of studying the industrial structure is to predict the development trend of the industry on the basis of its past record and finally serve the country or the area in the field of economy.
From the study of the evolution and history of the industry, we see that the tools played an important role in history for the growth of economy, division of labor, occurrence of new industry and the breakout of industry revolution. But the discovery and invention of these tools all had to resort to the accumulation of knowledge and technology. Secondly, with the development of the society and improvement of people’s life, there is a demand for a larger number of products, for a greater variety of product, which naturally lead to the expansion of the production and further division of labor.
2.3 An inter-acting model of knowledge flow and industrial structure evolution
The flow of knowledge is carried out among knowledge supplying, knowledge requirement and knowledge agent. This flow first has to resort to the support of networks before it is used or stored by the knowledge base,












            Fig. 2  Model of industry network, info-network and kno-network

knowledge innovation organization and knowledge users. During the processing of the flow, the knowledge is processed and re-energized and stocked at different stops so that some “energy flow and energy difference” can arise and make it a smooth network. The knowledge flow system and industrial structure system interacts with each other, mutually benefit each other and make a non-game mechanism. The significance of Figure 1 can been seen as follows:
Knowledge flow makes available the knowledge information and this information acts on the industry systems through the network, promoting the evolution and updating of industry structure. The inter-acting factors inside the flow system helps the arising of the format of “knowledge—economic pattern” and “new knowledge—new industry—new economy” and the accelerating break of the original balance knowledge-industry relationship. This is what is called the process of acting on the industry.
On the other hand, with the evolution of the industry structure arises the industrial information, which will goes to the knowledge base through info-network and finally appears in the innovation body or institution and becomes the pulling-market factor. This factor will aid the formation and flow of knowledge. The innovation of knowledge can advance forward, sideward or backward and become the knowledge for a specific field and requirement. It will also enhance the spread of new knowledge and new techniques in traditional industries for their technique innovation.
In short, knowledge flow and the evolution of industrial structure can be mutually helpful: knowledge flow stocks resources for the industry structure to upgrade it while structure brings about the new requirement for new knowledge and pulls it to move forward. In other words, the interaction directly influences the path of economic growth. And determines the speed. A favorable interacting relationship between knowledge flow and industrial structure is very important for the economic development of a country or area.
3．Establishment of the interacting mechanism between knowledge flow and industry structure
The interacting mechanism between knowledge flow and industry structure can direct the economy developing in the same way with the flow of knowledge and it is also an effective method to increase knowledge capacity and speed economic structure evolution. So it is necessary to establish such an interacting mechanism in a country or area.    
3.1 Improving the knowledge flow mechanism
Since the beginning of the 21st century, knowledge has been an important factor in the development of economy and evolution of industry structure. The intensity and quality of knowledge of a country has been regarded as one of the main criteria for its national force. The difference in knowledge is also one of the main gaps between developed countries and under-developed countries. But in China, the economy is less dependable on knowledge factor and there is no sound system of knowledge flow. There are no authoratative evaluation systems for intellectual products, no simulative system for the staff and the efficiency of the knowledge producers are low. All these hamper the evolution of industry structure and the economic development. The improvement of the knowledge flow mechanism can be achieved in the following ways:
a. To improve the knowledge innovation system by establishing a knowledge flow network. This network should connect the knowledge flow system with the industry system.
b. To create a knowledge innovation-investment system. This system is made up of three parts: national fund for R&D in fundamental sciences; enterprise fund for applied sciences and technological research.
c. To improve the stimulation system in the knowledge supplying network. This will increase the efficiency of the knowledge producers and increase the importance of knowledge to economy.
d.To enforce the management of and protection against intellectual property right.  
3.2 Reforming the evolution system of industrial structure
The evolution of industrial structure is mainly advanced by the governed investment and it did work well in the beginning. But with the economic development in China, this evolution mechanism also brings a lot of problems like repeated construction, imbalanced development, overproduction of some products, and has some negative effects on the sustainable development. So it is quite important to establish a system to change the present industrial structure evolution into a knowledge-oriented industrial structure.
a. To establish a sound system for industrial net.
b. To establish an effective system for the products within the same industry or same enterprises. Try to invite talents and resources outside the system.
c. To establish an effective investment system for intellectual products; do some research in new products and technologies.
4. Conclusion
There is a relationship between the knowledge flow and the industrial structure evolution and the effectiveness and efficiency has become not only one of the main criteria for its national power, but also a main index for the improvement of industrial evolution. The evolution of industrial structure is dependable on knowledge flow. China in the 21st century really needs an inter-acting system for the economic development. This system can greatly contribute to the production.

References:
[1] Ming Zhong “An Annalistically Study of the Innovation and Reform in China ”[J]Research and Achievement 2001，(5) PP: 1-6。
[2] Yaohui Zhang A Survey on Industrial Innovation in China , China Plan Press，2002,2：PP: 72-110
[3] Weisenfeld, U etal. Managing Technology as a Virtual Enterprise [J].R＆D Management,2001,31(3) PP: 323-334
[4] Benner,Mary Jo. Process Management, Technological Innovation and Organizational Adaptation. 2002, PP: 75-120
[5] Juan D.Rogers, Barry Bozeman. A “Churn” Model of Innovation: The Non-linearities of Use Orientation in the Process of Innovation. International Summer Academy On Technology Studies 2001,July8-13, PP: 205-221

                                                               (Edited by Shumin Wang)

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