THE ECONOMICS OF INNOVATION THE ECONOMICS OF INNOVATION Seyed Ali Fallahchay Publishing www.societypublishing.com The Economics of Innovation Seyed Ali Fallahchay Society Publishing 2010 Winston Park Drive, 2nd Floor Oakville, ON L6H 5R7 Canada www.societypublishing.com Tel: 001-289-291-7705 001-905-616-2116 Fax: 001-289-291-7601 Email: [email protected] e-book Edition 2020 ISBN: 978-1-77407-561-6 (e-book) This book contains information obtained from highly regarded resources. Reprinted material sources are indicated and copyright remains with the original owners. Copyright for images and other graphics remains with the original owners as indicated. A Wide variety of references are listed. Reasonable efforts have been made to publish reliable data. Authors or Editors or Publish- ers are not responsible for the accuracy of the information in the published chapters or conse- quences of their use. The publisher assumes no responsibility for any damage or grievance to the persons or property arising out of the use of any materials, instructions, methods or thoughts in the book. The authors or editors and the publisher have attempted to trace the copyright holders of all material reproduced in this publication and apologize to copyright holders if permission has not been obtained. If any copyright holder has not been acknowledged, please write to us so we may rectify. Notice: Registered trademark of products or corporate names are used only for explanation and identification without intent of infringement. © 2020 Society Publishing ISBN: 978-1-77407-252-3 (Hardcover) Society Publishing publishes wide variety of books and eBooks. For more information about Society Publishing and its products, visit our website at www.societypublishing.com. ABOUT THE AUTHOR Seyed Ali Fallahchay Completed his Bachelor of Science in Industrial and Forestry Engineering from Azad University of Iran. Masters in Business Administration and also, completed his Ph.D in Business Management from De La Salle Araneta University, Philippines. Currently, a Research and Development Director at AMA University, Philippines. He became program head of Business Administration at AMA online Education. He also became a faculty in graduate studies and has several years of working experience in teaching and in industry. TABLE OF CONTENTS List of Figures ................................................................................................xi List of Abbreviations ....................................................................................xiii Preface........................................................................ .................................xv Chapter 1 Introduction to Economics and Innovation ...............................................1 1.1. Theories of Innovation.........................................................................2 1.2. Theories of Economic Development ....................................................7 1.3. Theories of Entrepreneurship .............................................................12 1.4. Capitalism and Innovation ................................................................17 1.5. Socialism and Innovation ..................................................................22 Chapter 1 Summary .................................................................................27 Chapter 2 Innovation In Various Economic Systems ................................................29 2.1. Political Economy Of Innovation.......................................................30 2.2. Innovation In Communism................................................................35 2.3. Innovation In Mixed Economies ........................................................39 2.4. Relationship Between Democracy And Innovation ............................44 2.5. Innovation In Authoritarian Regimes .................................................49 Chapter 2 Summary .................................................................................53 Chapter 3 Drivers of Innovative Economic Growth .................................................55 3.1. Institutional Frameworks And Innovation ..........................................56 3.2. Role Of Entrepreneurs And Innovators ..............................................61 3.3. Small And Medium Sized Businesses ................................................66 3.4. Technology And Innovation...............................................................71 3.5. International Trade And Innovation ...................................................76 Chapter 3 Summary .................................................................................81 Chapter 4 Key Scholars In The Economics Of Innovation ........................................83 4.1. Joseph Schumpeter ...........................................................................84 4.2. John Maynard Keynes .......................................................................91 4.3. Michael Porter ..................................................................................96 4.4. Paul Romer .....................................................................................101 4.5. Elhanan Helpman ...........................................................................107 Chapter 4 Summary ...............................................................................112 Chapter 5 Geography And Innovation ...................................................................113 5.1. Natural Resources ...........................................................................114 5.2. Human Capital Development .........................................................120 5.3. Services And The Financial Sector ...................................................125 5.4. Economic Liberalization Policies ....................................................130 5.5. Industrialization And The Rhine Region ..........................................135 Chapter 5 Summary ...............................................................................141 Chapter 6 Examples Of Centers Of Innovation ......................................................143 6.1. The Silicon Valley In California .......................................................144 6.2. Research Triangle Park In North Carolina ........................................147 6.3. Energy Corridor In Houston, Texas ..................................................150 6.4. Genome Valley In Hyderabad .........................................................154 6.5. Digital Media City In Seoul .............................................................157 Chapter 6 Summary ...............................................................................161 Chapter 7 Key Concepts In Innovation Economics ................................................163 7.1. Business Cluster ..............................................................................164 7.2. Knowledge Economy ......................................................................167 7.3. Metropolitan Economy ...................................................................171 7.4. Keynesian Economics .....................................................................174 7.5. International Innovation Index ........................................................178 Chapter 7 Summary ...............................................................................182 Chapter 8 Supporting Innovators And Entrepreneurs ............................................183 8.1. Education And Sensitization............................................................184 8.2. Offering Affordable Capital Financing .............................................186 viii