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Innovation and Economic growth Featured

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Innovation is not a new phenomenon. Arguably, it is old as mankind itself. There seems to be something inherently ―human‖ about the tendency to think about new and better ways of doing things and to try them out in practice. Innovation is a major factor  of economic growth and performance in the globalised economy. The relationship between innovation and economic growth has been well studied. However, that is not to say that it is well understood. Innovation brings new technologies and new products that help address global challenges, new ways of producing goods and delivering services boost productivity, create jobs and can help improve citizens‘ quality of life.

Innovation is the throbbing heart of the twenty first century economy, consistently pumping new revitalizing activity through the system. The opposing force is commoditization probably the single most powerful force in business today which rapidly takes what was distinctive and profitable and rapidly makes it commonplace and marginal, sucking out the vitality and profitability.

Economic growth is most commonly measured using changes in the total value of goods and services produced by a country‘s economy or what is know as Gross Domestic Product (GDP). Of course, since the size of countries varies this number is adjusted for the size of the population which provides a crude measure of the average individual‘s well-being. As stated in a research paper done by Torun and Cicekci that a theoretical link between innovation and economic growth has been contemplated since at least as early as Adam Smith (1776). Not only did he articulate the productivity gains from specialization through the division of labor as well as from technological improvements to capital equipment and processes.

The capacity and the ability to create economic value is critical to competitive advantage and growth for firms, industries and countries. The question then becomes how to best organize resources to create, diffuse and sustain innovation and, moreover, how to leverage investments made in science and technology, research and development and related capabilities with the ultimate goal of reaping rewards in terms of wealth creation and increased standards of living.

According to a report prepared by (MERIT) and the Joint Research Centre have analyzed the European Innovation Scorecard (EIS) which is an instrument to evaluate and compare the innovation performance of the EU Member States. This report includes Innovation indicator and trend analysis for the EU25 plus the two new Member States: Bulgaria and Romania, as well as for Croatia, Turkey, Iceland, and Norway. Taking into a consideration the situation in Europe, significant national differences are still observed. show the Summary Innovation Index (SII) on the vertical axis and the average growth rate of the SII on the horizontal axis. From the figure below we can see that countries above the horizontal dotted line currently have an innovation performance above that of the EU25. Countries to the right of the vertical dotted line had a faster average increase in the SII than the EU25.


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