The Economics of Innovation

The Economics of Innovation
Name:
Institution:
The competitiveness of both companies and the economy is significantly dependent on the ability to innovate; this explains why some regions have grown faster over the years than others, and some have continued stagnating. Innovation is an aspect of technological advancement which acts as a major diver of economic growth. Innovation affects the economy in different aspects, which include growth, global competitiveness, and infrastructural development, and financial systems. Additionally, innovation would also be used to address critical development challenges that are experienced within the economy; further research efforts are also critical in facilitating innovative methods that are pivotal in promoting economic development. Therefore, the build-up of innovation abilities is essential in facilitating growth dynamics for successful and developing economies. Most importantly, different types of innovations are needed in various stages of development. For example, incremental innovation would necessitate the adoption of foreign innovation to the effectiveness of economic activities. High-technology research and development-based technology help increase the firm's competitiveness.
Western nations have experienced an economic decline from 1989 to 2019. Many western countries, including the United States, the United Kingdom, and Italy, among others, started experiencing a decline in global competitiveness. The countries also began falling behind the developing states such as India and China in other areas such as job creation. Furthermore, over the years, western countries have recorded a decline in the development and technical ability, which reduced engineering products and affected the countries' industrial base. One of the significant factors that have to facilitate the economic decline of western countries is the inability to develop a strong competitive power in critical industries such as the manufacturing sector. The inability of western countries to dominate the global manufacturing industry has reduced their competitiveness. These manufacturing firms lose their market shares to companies in other parts of the world. For instance, in the United States, the civil airplane industry has continued losing market share to other players.
Besides, problems in the critical service industries such as health and finance influence the growth and development of the economy in western countries. The serious decline of the quality of services in essential sectors of the economy has affected the capacity to expedite economic growth. For example, an infective health sector cannot help in eradicating neglected health issues that impact the health of the people. An unhealthy population would have challenges in engaging in activities aimed at promoting economic development. The Organisation for Economic Co-operation and Development (OECD) maintains that economies should be focused on promoting technologies and innovations to address challenges specific to their local contexts (Organisation for Economic Co-operation and Development, 2012). For instance, the United States should make innovations needed for promoting stability in the finance and health industries. Additionally, the economic de...