Innovation Policy And Economy:

Innovation economics may be a growing theory that emphasizes entrepreneurship and innovation. In his 1942 book Capitalism, Socialism and Democracy, economist Schumpeter introduced the notion of an innovation economy. He argued that evolving institutions, entrepreneurs and technological changes were at the guts of economic process . However, it is only in recent years that "innovation economy," grounded in Schumpeter's ideas, has become a mainstream concept Innovation economists believe that what primarily drives economic growth in today’s knowledge-based economy isn't capital accumulation as neoclassical economics asserts, but innovative capacity spurred by appropriable knowledge and technological externalities. Economic growth in innovation economics is that the end-product of:

• knowledge (tacit vs. codified);

• regimes and policies allowing for entrepreneurship and innovation (i.e. R&D expenditures, permits and licenses);

• technological spillovers and externalities between collaborative firms;

• systems of innovation that create innovative environments (i.e. clusters, agglomerations and metropolitan areas).

In 1970, economist Milton Friedman said in the New York Times that a business’s sole purpose is to generate profits for their shareholders and companies that pursued other missions would be less competitive, leading to fewer benefits to owners, employees and society.[7] Yet, data over the past several decades shows that while profits matter, good firms supply much more , particularly in bringing innovation to the market. This fosters economic process , employment gains and other society-wide benefits. Business school professor David Ahlstrom asserts that "the main goal of business is to develop new and innovative goods and services that generate economic process while delivering benefits to society Despite the differences in economic thought, both perspectives are based on the same core premise, namely the foundation of all economic growth is the optimization of the utilization of factors and the measure of success is how well the factor utilization is optimized. Whatever the factors, it nonetheless leads to the same situation of special endowments, varying relative prices and production processes. Thus, while the two differ in theoretical concepts, innovation economics can find fertile ground in mainstream economics, rather than remain in diametric contention Empirical evidence worldwide points to a positive link between technological innovation and economic performance. The drive of biotech firms in Germany was thanks to the R&D subsidies to joint projects, network partners and shut cognitive distance of collaborative partners within a cluster. For instance:

• These factors increased patent performance in the biotech industry.[9]

• Innovation capacity explains much of the GDP growth in India and China between 1981–2004, but especially in the 1990s. Their development of a National Innovation System through heavy investment of R&D expenditures and personnel, patents and high-tech/service exports strengthened their innovation capacity. By linking the science sector with the business , establishing incentives for innovative activities and balancing the import of technology and indigenous R&D effort, both countries experienced rapid economic growth in recent decades.[10]

• AThe Council of Foreign Relations also asserted that since the end of the 1970s the U.S. has gained a disproportionate share of the world’s wealth through their aggressive pursuit of technological change, demonstrating that technological innovation may be a central catalyst of steady economic performance.[11]

Concisely, evidence shows that innovation contributes to steady economic process and rise in per capita income.[8]However, some empirical studies investigating the innovation-performance-link lead to rather mixed results and indicate that the relationship is more subtle and complex than commonly assumed.[12] In particular, the relationship between innovativeness and performance seems to differ in intensity and significance across empirical contexts, environmental circumstances and conceptual dimensions.All of the above has taken place in an era of data constraint as identified by Zvi Griliches in the 1990s.[13] Because the primary domain of innovation is commerce, the key data resides there, continually out of campus reach in reports hidden within factories, corporate offices and technical centers. This recusal still stymies progress today. Recent attempts at data transference have led not least to the positive link (above) being upgraded to exact algebra between R&D productivity and GDP allowing prediction from one to the other. This is pending further disclosure from commercial sources, but several pertinent documents are already available