Innovation, Entrepreneurship, and the Economy in the US, China, and India

Historical Perspectives and Future Trends

Rajiv Shah, Zhijie Gao, Harini Mittal

• Publisher: Academic Press
• Year: 2014
• Print ISBN: 9780128018903
• eBook ISBN: 9780128018651
• Topic: Economics
• Subtopic: Development Economics
• Index: Economics

What drives innovation and entrepreneurship in India, China, and the United States? Our data-rich and evidence-based exploration of relationships among innovation, entrepreneurship, and economic growth yields theoretical models of economic growth in the context of macroeconomic factors. Because we know far too little about the key characteristics of Chinese and Indian entrepreneurs and the ways they innovate, our balanced, systematic comparison of entrepreneurship and innovation results in a new approach to looking at economic growth that can be used to model empirical data from other countries. The importance of innovation and entrepreneurship to any economy has been recognized since the pioneering work of Joseph Schumpeter. Our analysis of the major factors that affect innovation and entrepreneurship in these three parts of the world – US, China and India –provides a comprehensive view of their effects and their likely futures. - Looks at elements important for innovation and entrepreneurship and compares them against each other within the three countries - Places theoretical modeling of economic growth in the context of the overall macroeconomic factors - Explores questions about the relationships among innovation, entrepreneurship and economic growth in China, India and the US

Part I

Innovation

Chapter 1

Innovation

Abstract

We discuss what innovation is, since this is a term that has come to mean a lot of different things to a lot of different people. Since the entire first section of the book is devoted to innovation and the role of innovation, we define how we use the word innovation in our book. We also then discuss why innovation is important in any economy, and finally, we list the factors that we believe are important contributors for innovation to thrive. We further lay the groundwork for the first part of the book in this chapter by briefly comparing and contrasting general innovation trends in the United States, China, and India over the last few years using innovation indices and subindices of the United States, China, and India computed by INSEAD and WIPO.

Keywords

Clayton Christensen

Creative output

Economic growth

Global Innovation Index

Innovation

Joseph Schumpeter

Knowledge output

Peter Drucker

Technical progress

Value creation

Chapter Contents

What is Innovation? 3

Why is Innovation Important? 4

Factors Contributing to Innovation 5

References 7

What is Innovation?

A lot has been written on the subject of innovation. More than 250 books were published with the word “innovation” in their title in just the first 3 months of 2012, and the term appeared more than 33,000 times in 2011 alone, in the annual and quarterly reports filed with the US Securities and Exchange Commission (SEC), a 64% increase from 2006 (Kwoh, 2012).

The word “innovation” has come to mean a lot of different things to a lot of different people, and as is typically the case with words in vogue at different periods in time, this word has been used and abused to the point where the word may have begun to lose its meaning. While the word is derived from the Latin noun innovatus and appears in print as early as the fifteenth century, the more modern interpretation and expounding of it go back to the famous economist Joseph Schumpeter and his writings in the 1930s (Schumpeter, 1934).

In 1934, Schumpeter added a definition of “innovation,” or “development,” as “new combinations” of new or existing knowledge, resources, equipment, and other factors. He pointed out that innovation needs to be distinguished from invention. The reason why Schumpeter stressed this difference is that he saw innovation as a specific social activity, or “function,” carried out within the economic sphere and with a commercial purpose, while inventions in principle can be carried out everywhere and without any intent of commercialization. Thus, for Schumpeter, innovations are novel combinations of knowledge, resources, etc. subject to attempts at commercialization—it is essentially the process through which new ideas are generated and put into commercial practice. This “combinatory” activity he labeled “the entrepreneurial function” and the social agents fulfilling this function “entrepreneurs.” For Schumpeter, these are keys to innovation and long-run economic change (Fagerberg, 2008).

After this early discussion of innovation and entrepreneurship, the next authoritative work on this subject was due to the famous management guru Peter Drucker in the 1980s (Drucker, 1985). Peter Drucker defines “innovation” in his 1985 book “Innovation and Entrepreneurship” as: “Innovation is the specific tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or a different service. It is capable of being presented as a discipline, capable of being learned, capable of being practiced. Entrepreneurs need to search purposefully for the sources of innovation, the changes and their symptoms that indicate opportunities for successful innovation, and they need to know and apply the principles of successful innovation.” It is clear from this definition that (1) innovation is not just about inventions or about new technology, but about new business opportunities created through new technologies, products, services, processes, business models, etc.; (2) innovation is not something that just happens by itself, but is a structured or systematic process that requires discipline and that can be learned and practiced; and (3) in order to succeed at innovation, you need to be proactive and search for the sources of innovation and exploit them. Innovation is a process for creating and introducing something new, novel, or advanced with the intention of creating value or benefit (Hisrich and Kearney, 2014). Innovation is a process that begins with a new idea and concludes with market introduction.

In the 1990s and beyond, Clayton Christensen of the Harvard Business School wrote extensively on the subject (Christensen, 1997; Christensen and Raynor, 2003, Christensen et al., 2004; Dyer et al. 2011). In more recent years, there have been a plethora of writings on the subject of innovation and various interpretations of the term. The intent of this work is not to debate the subject or to delve into the various interpretations, definitions, types, or applications of the term. Instead, we will first look at why innovation is important and what are the various factors that contribute to it and explore how these factors differ across some of the regions of the world, more specifically across the United States, China, and India. In order to facilitate that, we will use the definition of innovation as used by Schumpeter or by Peter Drucker, viz., innovation results from the application of knowledge and results in new ...

Table of contents

• Cover image
• Title page
• Table of Contents
• Dedication
• Copyright
• Preface
• Introduction
• About the Authors
• Acknowledgment
• Part I: Innovation
• Part II: Entrepreneurship
• Part III: Impact on the Economy
• Part IV: Conclusions
• Appendix 1
• Appendix 2: Innovation Data
• Index