Role of Innovation in Economic Growth

Ada Aggarwal

In a fast-changing world, where economies are the wheels of progress, innovation is becoming the focal point of progress, productivity, and prosperity. Be it, the introduction of the World Wide Web, the advent of electric cars, or the proliferation of digital money, innovation is going to take the leading role of ensuring economic growth. It is establishing markets, making the processes more efficient, and unleashing human capacity that become the economic drivers and bring the fruits of economic labor.

The term “economic growth” basically signifies an increase in a country’s production of goods and services over a certain period of time. Previously, this was achieved through the increase in human resources (more workers) or the increase in capital (more machines, factories, etc.). However, in the modern economy, employing more workers, or increasing the number of factories have ceased to be solely the causes of fast growth. On the contrary, innovation which represents the introduction of new ideas, technologies, and processes has been identified as the main driver.

It was in fact in the 18th century that innovations such as the steam engine, spinning jenny, and power loom reshaped the manufacturing sector of the economy. These new technologies significantly improved productivity, as goods could be produced faster and with more affordability, and this, in turn, led to the creation of industries and the development of cities.Countries that followed these changes like Britain, took a big step economically, while the rest were left behind.

The present-day digital era is characterized by the continuation of the process that has been initiated a while ago. The technolgical revolution, sparked off by the initiative of companies such as Apple, Google, and Microsoft, is the primary factor that has turned around our lifestyle, work, and communication. These companies did not only make more profits but first and foremost, they did it by bringing their views to the market. They carried out the operation of various studies, and the new products and services that the companies developed from those studies were never found in the market previously, such as the case of smartphones, cloud computing, and artificial intelligence. These innovations clearly not only were of great help to the companies but also they served to stimulate the whole economy through fresh and better jobs, increased productivity, and even helping small businesses to get a whole new market other than the local one.

Another point to consider is mobile banking which has a significant impact on the economy. In underdeveloped countries where the traditional financial system is weak, the deployment of mobile banking has been a revolution. In a country like Kenya, the power of services like M-Pesa is unprecedented as it allows users to transfer, receive, and save money using just their mobile phones.

Sustainability is one of the key areas for a better future. In the face of climate change issues, a transition in the energy, transportation, and manufacturing systems towards solar power,

EVs, and the use of eco-friendly ingredients and low-energy production processes becomes a necessity.

The realization of economic growth and environmental protection as contradictory phenomena is now just a thing of the past.

However, at present, the changes in the form of solar panels, biodegradable packaging, and carbon capture technologies, indicate the possibility of not only growth but environmental friendliness as well.

However, the introduction of new things does not always result in the development of the industry. For innovations to come, countries have to fulfill the following requirements: a good education system, strong legal protections (patents), finance, and entrepreneurship-friendly policies.

Thus, the development of most of the governments’ support takes place in research institutions, startup incubators, and technology parks and is geared towards achieving the said targets. Therefore, these places play a major role as the new thought can emerge, take a form, and eventually grow.

An educationally well-equipped country is more prone to develop new technologies and operate the currently existing ones effectively. This explains why such countries as South Korea and Finland, in spite of little natural resources, have become global innovation centers.

However, challenges still exist. There are innovations that aren’t inclusive. At times, technological changes can be linked to job losses in traditional industries, resulting in a higher income disparity or, at the very least, wealth concentration in the hands of the few.

Therefore, it is necessary that policymakers are not only implementing innovations but also taking into account the provision of safety nets, upskilling programs, and fair regulation. The aim should be “inclusive innovation”-growth that is beneficial to everyone, not just a few.

Conclusively, innovation means not just the invention of gadgets; it is a question of seeing and seizing the possible and bringing a better future that is also more productive and efficient. As the world is constantly confronting a lot of difficult challenges- ranging from a pandemic to climate change to automation-in this case, innovation is the path of success.

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