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Innovation can lead to economic development by creating entrepreneurial opportunities and leveraging human capital. Countries with well-developed education systems tend to have more innovators, leading to economic growth through entrepreneurship. Some countries with fewer natural resources rely on human capital and innovation for economic success.
The relationship between innovation and economic development lies in the way in which innovation can be applied to the economic development of a country. One of the links between innovation and economic development is the fact that innovation creates new entrepreneurial opportunities with corresponding paths to economic development. The most direct link between innovation and economic development is leveraging the knowledge or human capital needed for a greater incidence of innovation for the benefit of the economy.
An analysis of the connection between innovation and economic development will lead to the conclusion that a country blessed with a significant number of innovators will reflect the benefits of such wealth through the development of the economy. Innovation requires the application of knowledge to create opportunities, which may not be apparent to those who do not have the same quality of human capital. In this sense, there is a link between innovation and education. Countries with well-developed educational systems tend to have a larger number of people with the human capital needed for high levels of innovation compared to countries that do not. The economic benefit to the country can be seen in the way the country’s citizens use their knowledge to develop the economy.
Entrepreneurship is a direct offshoot of innovation due to the fact that most new ideas need some sort of business structure to implement them. For example, an innovative entrepreneur who decides to apply his ideas to a commercial venture will need to hire employees, rent a business premises, and generally make other types of investments in property and human capital, including paying taxes to the government. Where the idea is solid, business will grow, leading to the establishment of other subsidiaries, partnerships with foreign investors, reduction of unemployment and other avenues for the development of the economy.
Some countries with fewer natural resources, especially Asia, depend largely on an abundance of human capital as a means of achieving economic development. The innovative spirit of the citizens of such nations can be seen in their achievements in many areas, including science and technology. An application of this innovation combined with entrepreneurial opportunities is a formula that has led to the great economic achievements evident in the perception of countries as some of the world’s economic powerhouses.
Asset Smart.
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