Innovation and Economic Performance

Abstract

Kline and Rosenberg wrote in their influential 1986 article (p. 279): “There is no need to belabor the point that technological innovation is absolutely central to economic growth and to improvements in efficiency. If there is any residual doubt, one need only think back 100 years to 1885 and ask, ‘Would any commercial firm operating as it did then survive in today’s economy?’” The answer to this question is undoubtedly no. Similarly, a firm operating as it did in 1985 would not survive in today’s global economy. Although it is now well established that innovation and technological change are essential in enhancing long-term economic growth and standards of living, the study of the impact of innovation on economic performance has long been partially neglected in mainstream economics.