The Role of Innovation in Creating the Knowledge-Based Economy
Myriam RamZy Michel Gad;
Abstract
The study tackles the role of innovation in creating the knowledge based economy. It aims to identify how the development of innovative capabilities contributes to the creation of the knowledge-based economy by examining the impact of innovation on economic growth and human development within the knowledge-based-economy.
Chapter 1 reviews the theoretical literature of the economics of innovation by addressing the contribution of the classical economists, and the neoclassical and endogenous growth theorists. Smith (1776), Marx (1887) and Schumpeter (1934; 1939; 1942) argued that innovation is an endogenous process to the economic system, and is a central element to the evolution and the development of capitalism. Innovation is undertaken by the capitalists and the entrepreneurs who introduce new capital-intensive and cost-reducing technologies (new machinery) that enhance production efficiency. Moreover, they found that innovation improves the welfare of the whole society; the capitalist. or the
entrepreneur would benefit from increased profits, and the labor would benefit from increased consumption and product varieties available at lower prices. Then, Solow (!956; 1957) developed the neoclassical growth model according to which capital accumulation is the main determinant of grO\vth in the short and medium-runs, and exogenous
. technological change only sustains growth in the long-run. However,
differently from Solow's growth model, new growth theories developed endogenous innovation-based growth models that explained differences in development levels by differences in technological levels. These models incorporated innovation as an endogenous factor that sustains long-run growth. Romer (1990), Aghion and Howitt (1992), and Grossman and Helpman (1991; 1994) argued that R&D activities are mainly undertaken by forward-looking and profit-maximizing private firms that aim to introduce horizontal and vertical innovations in order to earn private profits. They focused on the role of R&D sector, human capital, patent protection and knowledge spillovers in sustaining innovation and growth in the long-run. Hence, these theoretical arguments confirm that innovation can drive the creation and the development of the knowledge-based economy through its impact on economic efficiency, productivity, and sustained long-run growth.
Chapters 2, 3 and 4 examine the empirical impact of innovation on creating the knowledge-based economy by emphasizing its impact on economic growth and human development.
Chapter 1 reviews the theoretical literature of the economics of innovation by addressing the contribution of the classical economists, and the neoclassical and endogenous growth theorists. Smith (1776), Marx (1887) and Schumpeter (1934; 1939; 1942) argued that innovation is an endogenous process to the economic system, and is a central element to the evolution and the development of capitalism. Innovation is undertaken by the capitalists and the entrepreneurs who introduce new capital-intensive and cost-reducing technologies (new machinery) that enhance production efficiency. Moreover, they found that innovation improves the welfare of the whole society; the capitalist. or the
entrepreneur would benefit from increased profits, and the labor would benefit from increased consumption and product varieties available at lower prices. Then, Solow (!956; 1957) developed the neoclassical growth model according to which capital accumulation is the main determinant of grO\vth in the short and medium-runs, and exogenous
. technological change only sustains growth in the long-run. However,
differently from Solow's growth model, new growth theories developed endogenous innovation-based growth models that explained differences in development levels by differences in technological levels. These models incorporated innovation as an endogenous factor that sustains long-run growth. Romer (1990), Aghion and Howitt (1992), and Grossman and Helpman (1991; 1994) argued that R&D activities are mainly undertaken by forward-looking and profit-maximizing private firms that aim to introduce horizontal and vertical innovations in order to earn private profits. They focused on the role of R&D sector, human capital, patent protection and knowledge spillovers in sustaining innovation and growth in the long-run. Hence, these theoretical arguments confirm that innovation can drive the creation and the development of the knowledge-based economy through its impact on economic efficiency, productivity, and sustained long-run growth.
Chapters 2, 3 and 4 examine the empirical impact of innovation on creating the knowledge-based economy by emphasizing its impact on economic growth and human development.
Other data
| Title | The Role of Innovation in Creating the Knowledge-Based Economy | Other Titles | دور الابتكار فى خلق الاقتصاد القائم على المعرفة | Authors | Myriam RamZy Michel Gad | Issue Date | 2011 |
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