Innovation and Its Role in the Economy

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Innovation and its role in the economy
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Since at least the 18th century the world has experienced new standards of living. The economic growth was not provided only by simple exploitation of natural resources anymore. Advancing technology has become a source of the growth in the world’s standard of living. The interest in this growth became the main topic for the researchers from 1950s. The economists were aimed to answer such questions as what are the key reasons for the growth in incomes over the time and why are some countries richer than others. Nowadays there are numerous theories explain the influence of technological progress on the economic growth. (Simon Kuznets: Modern Economic Growth: Findings and Reflections, 2012)
Robert Solow, the Nobel laureate, was the first who introduced the relationship between technology and economic growth into formal economic growth model in 1957. He characterized the economic growth as a growth in GDP per hour of labor. He referred the primary determinant of the growth to the increase in capital and, more precisely to investments in equipment, machinery and tools. Nonetheless, it amounted to less than quarter of the whole growth. Further Solow’s researches showed the connection between the growth and “technical change”. Since his findings, many theories proving the same principle were developed. One of the most famous was the concept of human capital (Lucas) in 1988 and the concept of knowledge spillovers (Romeo) in 1990. They divided the capital by human capital (education, knowledge) and physical capital.
Today the development of human’s knowledge, its accumulation and its spread provide us with new opportunities we did not have before. Everyday we use some products or services that we were not able even to imagine ten years ago, for example. The same will happen in the next ten years when all the things that we are so used to today will be replaced with new highly technological and advanced

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