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Innovation and growth

Innovation is a process of resource allocation. First, developmental, in that it commits resources to irreversible investments with uncertain returns. Second, organisational, in that it generates returns through the integration of human and physical resources. Third, strategic, in that it allocates resources to overcome market and technological conditions that other firms take as given.

Why is innovation important to growth?

Stagnant growth, little to no growth, is as a result of a) lack of consumption, and b) lack of innovation. While lack of consumption may be tackled through Keynesian demand-side economics – boosting the aggregate demand in an economy. This is artificial and cannot be sustained without innovation. For the reasons mentioned above, innovation is a greater driver of growth than demand-side economics.

What has innovation and growth got to do with today?

Well, if you hadn’t noticed it is a worry that Britain’s growth could stagnate. The coalition government also launched http://www.startupbritain.org – a website with useful links and information, together with corporate sponsorship, to help people to innovate and start up their own business with the drive of entrepreneurialism.

Great idea, but what’s the catch?

There isn’t one. However, many may feel that this is just another shallow gimmick by the government to get people on board with their programme. It may be, but it’s not a gimmick. It’s a step in the right direction for Britain to realise its entrepreneurial spirit. It’s something that should be applauded, embraced and built upon by all major parties, especially Labour if it is to seek re-election.

  1. March 28, 2011 at 13:03

    There isn’t a catch because there isn’t any substance. It reminds me of a shallow version of a book I bought before I started my own business three years ago. It’s an empty gesture and what Labour should be doing is demanding tangible measures to support innovation. The truth is, most new businesses simply provide a slightly different version of an existing service. Really important new developments, which can drive growth, require investment in education, R&D funding and ongoing and secure access to money and support. This web site does nothing to address these issues. I doubt a single business will start up on the back of this – if someone was serious about starting a business, they will already have seen all of the information on offer and a good deal more. If they haven’t, they are very likely to fail.

  2. March 28, 2011 at 16:28

    I couldn’t agree with you more that innovation is essential to creating long term sustainable growth, however, the launch of startupbritain.org is quite simply a gimmick. Any serious entrepreneur could find more helpful resources within a couple of minutes on either google or twitter for that matter. At best all it does is promote a series of laughable discounts with huge companies that know next to nothing about how to encourage small business startups.

  3. Ust Oldfield
    January 23, 2012 at 10:19

    Reblogged this on The Guerrilla Economist.

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