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Innovation as an Engine of Economic Growth

 

 

 

 

 

The speed and efficiency of the diffusion of innovation through the economy is critical to productivity and economic growth. It can be pictured as a cascade process. Through the forces of competition and imitation, an initial innovation is developed and improved so that the impact on the economy is many times greater than that brought about by the first application of the innovation.

Leaders in technology development are not necessarily leaders in technology adoption. The most important economic contribution does not necessarily come from the "early adopter" but from the "fast follower" who adopts the innovative design that captures the international market.

   

 

 

 

As Jack Welch, former CEO of GE, put it: "The operative assumption today is that someone, somewhere, has a better idea; and the operative compulsion is to find out who has that better idea, learn it and put into action – fast."

In fast-moving sectors it is the new enterprises with growth potential that are often the most innovative, forcing established enterprises to respond to the change by themselves becoming more innovative. Encouraging the emergence of new firms is a strong force for innovation in many sectors.