Abstract:

Innovation is critical for economic development, but innovation is viewed differently (or not at all) by the different schools of thought.  The aim of this article is to determine what the relationship between innovation and economic development entails.  A qualitative, descriptive analysis is made of a number of empirical studies to establish the relationship between innovation and economic growth.  It was found that studies having the later neoclassical models or the new growth models as their basis are based on simple systems of equilibrium models.  Equilibrium models cannot explain innovation’s role in economic development due to innovation being the essential factor that, through disturbing the equilibrium, leads to economic development.  Innovation is a complex non-linear relationship amongst the different actors or role players, as indicated by the neo-Schumpeterian economists.  Although there is consensus on the importance of innovation to economic development, the most important difference amongst the schools of thought concerning the role of innovation in economic development lies in the process. The process from innovation to economic development still needs further investigation.