Innovation and Economic Growth
There is a wide range of studies on the links between innovation and growth. Although there are complexities and technical difficulties in measurement and attribution, the general consensus is that there is a positive correlation between the two, both at the firm level and through spillover benefits, at country/regional level. Some examples include:
- William J Baumol 'Four sources of innovation and the stimulus of growth in the Scottish economy'. Part of the Allander series on Innovation & Enterprise, this report notes "the all-too-obvious conclusion that a reliable stream of innovation is the most important requirement of the remarkable long-run economic growth that has been experienced by the industrialized economies in the past two centuries".
- Richard Freeman 'What does modern growth analysis say about government policy towards growth?': Discusses how modern economic growth theory puts technical change, and the determinants of technical change, at the centre of the economics of growth and productivity increases. Freeman suggests that at country level, much of the cross-country analyses are inconclusive. However company level studies tend to produce more consistent results showing that investment in knowledge through R&D has a significant impact on growth. 5
- Harris et al (2006 6) discuss various methodological issues in determining the contribution of total factor productivity ( TFP, i.e. the output growth due to changes in technical efficiency and technical change) to growth as well as using micro-data to consider what causes differences in TFP across regions and/or sectors.