How important is innovation for growth of the economy?

Innovation is the main driver in the economic development of a country. Countries that support innovation and embrace technological development tend to grow faster than countries that don’t. Have you ever thought, why some countries in the world are rich and others are poor? The reason is they support and encourage their people who have the potential to bring innovation. Therefore, no one can deny the importance of innovation for the growth of the economy.

The economy of a country boosts when it produces more goods and services. More productivity leads to more employment and hence enhances the living standard of the people. So in economic terms, we can define innovation as the development and application of ideas and technologies that help a country make its goods and services more efficient. The latest example of innovation is the use of information technology that has totally transformed the lives of millions of people around the world.

The use of mobile is a simple example to understand innovation. Countries that encouraged and supported the idea of producing mobile phones helped them making billions of profits. Now mobile phone is an essential part of our life. Just think for a moment, there are millions of users around the world. So the countries that make these cellular phones, how much are they earning? Apple, Samsung, Huawei are some of the biggest cellular brands around the world.

Similarly, transforming the ways of production is also innovation. Ideas to reduce waste, ideas to generate more output with minimum input is also innovation. Greater output with minimum input helps companies generate more profits and ultimately helps the economic development of a country. Europe and United States are considered to be the hub for innovation. That’s the main reason for their fast economic development and high living standards.

It is very important for developing nations to promote innovation. That’s how they can boost their economy. They can do so by allocating high budgets on Research & Development (R&D), providing better education, making it easy for the entrepreneurs to enter the market, and similarly easy ways to exit for failed businesses. Similarly, companies can promote innovation by providing their staff with adequate training on innovative ways to increase productivity. Similarly, they can set up their own research & development department. That’s how innovation for growth of the economy can matter in the long run.