What is innovation?

INNOVATION:
The term innovation derives from the Latin word innovatus, which is the noun form of innovare "to renew or change," stemming from in-"into" + novus-"new". Although the term is broadly used, innovation generally refers to the creation of better or more effective products, processes, technologies, or ideas that are accepted by markets, governments, and society. Innovation differs from invention or renovation in that innovation generally signifies a substantial positive change compared to incremental changes.

What is Economy?

ECONOMY:
An economy is a spatially limited and social network where goods and services are exchanged according to demand and supply between participants by barter or a medium of exchange with a credit or debit value accepted within the network.



ROLE OF INNOVATION IN ECONOMICS:

Innovation, like spring, is in the air. Creativity is all the rage, Entrepreneurship is on every agenda. As Einstein tells us, it seems managers are more and more Âusing their legs (and their brains) to convert their ideas into constructive products. A question is always raised that:

How come this quite new and tremendous interest for what should be a daily preoccupation of managers?

One of the major reasons for this is that, with the acceleration of globalisation process, innovation is more and more seen as the appropriate tool to create business value.
Hence there are three parts that gives a general overview of this role:
1. First, we will describe the general framework of both free trade market and current economic trends.
2. Secondly we will analyse more deeply the core concept of innovation.
3.Finally, implementation of innovation will be treated, before widening our thought regarding key concepts such as value, and knowledge management.
By focusing on the interaction between innovation and business:
(a) The innovations have to be thought.
(b) Managers need a real strategy.
(c) The products and services have to be marketed and diffused in coherence with the overall strategy.


INNOVATION WILL GET THE ECONOMY MOVING:

Stripped of the jargon, PNCEGT means stuff the government can do to make the economy grow faster. The state has a role in boosting innovation and making sure the workforce is properly equipped with the necessary know-how.

According to Cable innovations are done to get the private sector moving while the Treasury is taking the axe to public spending. "By bringing together university policy, skills policy, business regulation and competition policy, science and research policy, it (Department for Business, Innovation and Skills) has become, in effect, the department for economic growth.
It is, in any event, a major economic department:
The portents for this relationship thriving are not encouraging. The Department for Economic Affairs was set up after the 1964 with the same remit as BIS, but Harold Wilson's new ministry was a failure, killed off by turf wars with the Treasury and by the deflationary policies pursued by Labour in a vain attempt to prevent the devaluation of sterling.
Mandelson, tantalisingly, came closest to an industrial policy that matched Wilson's vision of a Britain shaped by the "white heat" of technological revolution. BIS became more proactive. It championed the idea of a car scrappage scheme to help the motor industry but it also provided selective loans and grants to companies in sectors seen as strategically important for the future. Mandelson announced £20m to persuade Nissan to build new electric vehicles in Sunderland and £80m to Sheffield Forgemasters for a forging press that the company needs to compete with the Japanese in building a new generation of nuclear reactors. The sums were chicken feed when compared to the billions spent on recapitalising RBS or Lloyds, but are now under review as part of the coalition government's probe into all the money spent by Brown's administration during its last months in office.

Cable does not see his job as writing cheques to British business. He said that the state should be supporting "capabilities, not companies" and that Labour had blurred that line. "My general approach going forward will be supporting enterprise, but rarely selecting individual enterprises to support."

This sounds like a return to the hands-off approach favoured by Labour between 1997 and 2007: a strategy that did little to prevent the UK economy becoming over-reliant on financial and business services concentrated in London and the home counties.
A report by the National Endowment for Science Technology and the Arts suggests that there are four possible courses for the UK: business as usual:
(i) A broad-based manufacturing renaissance.
(ii) A hi-tech growth scenario .
(iii) A case in which businesses invest heavily in innovation across the economy.

Business as usual is slow to boost employment and delivers poor growth in the UK's old industrial regions. Nesta says a broad-based manufacturing strategy would boost the sector's contribution to the economy by three percentage points by 2020 – reversing decades of decline – but to do so industry would have to expand by more than 6% a year over the next decade, something it has not achieved since the second world war.

Building up hi-tech sectors to the levels seen in Germany or Finland would result in growth of 3% a year over the next decade, with hi-tech manufacturing enjoying annual expansion of almost 8%. The fastest growth of all (3.2% a year on average), according to work Nesta has done with Oxford Economics, is where innovation is boosted across all sectors of the economy, low-tech as well as hi-tech.
The report suggests this could be achieved through:
(1) Improved knowledge creation, perhaps using intermediary research centres to improve the commercialisation of university research.,
(2) Concentrating government support for business on growth companies.
(3) Encouraging open and competitive markets.
(4) Ensuring access to finance.
(5) Ending the neglect of further education.

Although Britain is by no means unique in seeing manufacturing decline as a share of the economy, all parties accept that there is a need for growth to be better balanced, both sectorally and geographically. There is a common belief that with the right mix of policies, the UK has what it takes to create a niche for itself as a provider of goods and services that require plenty of know-how. The idea of competing with the likes of China and India for low-cost products was abandoned long ago, but there is confidence that Britain can – in the jargon – move up the global value added chain. That means we compete on quality and not price.

Anybody who doubts that this may prove more difficult than it sounds should go to the "Charting innovation" page on the Organisation for Economic Cooperation and Development's website (oecd.org). Their graph provides a comparison over time of the impact spending on research and development has had on patents taken out in the three main patent offices of the world –
(i) the United States
(ii) Europe
(iii)Japan.

It is a cross plot of industrial R&D spending on the x-axis and so-called triadic patents on the y-axis. The importance of patents being taken out in all three big global markets is that these tend to be the ones that have a high value: many patents solely taken out in a company's local market are of low value.

Starting in the mid-1980s, the initial impression is of a global economy where innovation is the preserve of the leading western nations. The United States is in the lead, with Japan doing well in the boom years before its bubble burst, and Germany, France and the UK all in the leading pack. In the late 1990s, America pulls away from the rest thanks to its dominant role in the new technology boom, but the story of the 1990s is the advance of China (and, to a lesser extent, South Korea).

It used to be thought that China either imported knowledge into its economy through western multinationals or pirated the ideas of foreign companies, but the evidence from the OECD suggests otherwise. China is spending copiously on R&D (Reseasrch and Development) and the investment is paying off. Other emerging economies are getting the message.

As the OECD notes: "The United States and Japan still lead the world in R&D spending and patents. But emerging market countries are clearly investing ever more heavily in R&D – and reaping a rich reward in terms of patentable innovation. The map of commercial innovation is being redrawn by the day."

And the reason it is being redrawn is that other countries have been getting on with post neo-classical endogenous growth theory rather than spending the best part of 15 years waiting for the invisible hand to deliver Britain magically into a new golden age of hi-tech firms and happy, well-paid workers. They have no ideological hang-ups about using procurement, tax breaks, subsidies, state-sponsored investment banks, regulation and R&D spending to boost growth. And nor should we.

First, Elliott cites the conclusion of the recent report by the National Endowment for Science, Technology and the Arts (Nesta) on rebalancing the economy. Of the four scenarios considered, "the fastest growth of all (3.2% a year on average) … is where innovation is boosted across all sectors of the economy, low-tech as well as hi-tech".

Innovation is dependent on a much wider set of organisational and social capabilities that are overlooked by such measurements. The connection between investment in R&D and economic growth is thus much more complex and indirect.

Finally, innovation must currently deal not just with the economic crisis but also with enormous global social and environmental challenges – as recognised by the Green New Deal plan .


BY: ANSHU ANSHU MALA
MBA-1-B
ROLL NO: 5