LAUSR

Abstract Rural decline is an inevitable process as human society transforms from the agrarian to the urban-industrial economy, and further on to the knowledge economy. Through an extensive literature review, this paper aims to interpret why some rural areas decline while some others do not. The findings show that it is by the interactions between rural areas and the external environment that rural communities either grow, decline or even vanish. The paper emphasizes the necessity to improve rural communities' resilient capacity through adjusting their internal components' function and structure to survive the external changes. In this process, rural livelihood diversification, the creation of market oriented institutions and strong social capital are considered to enhance rural resilience and build up sustaining rural communities. Finally, three conditions for sustainable rural development in the knowledge economy are discussed: 1) development of new economic activities that can respond to potential urban demand; 2) local entrepreneurship that can establish and expand these new activities; and 3) social capital that can support the entrepreneurship in new activities with access to credits, labor, human capital, external markets and external knowledge for learning and innovation.