Economics Assignment: Impact Of Innovation On Global Economy
Question
Task:
Prepare a well-researched report on economics assignment illustrating about the topic 'Innovation and the Global Economics' following the steps bellow:
- Introduce the topic.
- Why it's relevant today?
- Explain that there is some debate about the topic.
- Conduct a literature review.
- Explain the problem that is still unresolved.
- Conclusion.
Answer
Introduction
Innovation is the key to success in today’s competitive and ever-changing global economy. As per the study of Reddy, Chundakkadan and Sasidharan (2021) taken in the economics assignment, innovation refers to the process by which new technologies are created and further used in the economy. Technology as defined by economists is a broad term. Therefore, while referring to innovation, it would mean including not only latest inventions or new machines but also the latest ways of doing things. In the 21st century, technology and science has been highly influential on the global economy. The economies, their foreign policies, economic growth and military power is highly impacted by innovation. Thus, the economies are laying adequate stress on innovating. There are several advantages of innovation which the nations across the world have realised over the years. Innovation is a prime factor in productivity. Through innovation, greater amount of output can be generated with same amount of input. The basic concept behind innovation impacting global economy is productivity. As innovation increases the productivity, the quantity of commodities or services produced increases, which facilitates the growth of the economy.
Relevance of the topic
In the contemporary world, innovation and global economics is of great relevance and significance. The different national economies have started recognising the huge potential of innovation in shaping the economy. The dimension of science, technology and innovation is being added to the factors contributing to the growth of the economy. The countries which have been innovating rigorously have successfully attained their desired economic growth (Iqbal and Rahman, 2018). For instance, America had been innovating during the 20th century, which brought the nation prosperity and better military edge over the other nations. The other nations like Japan and few in Europe, intend to adopt the innovation system of America to attain similar growth. The developing nations like India and China and few other emerging economies have recognised the potential of innovation and are aiming to emerge as strong innovators so that they possess higher economic power. The economy when considered as the global or world economy, is seeking to build its own strong, innovative capabilities (Rosario and Cruz, 2019).
The global economy or the world economy refers to the economy which comprises all the nations and people of the world. This is therefore termed as the global economic system. In this global economic system, there are various economic activities which are performed every day. The various nations, within and with each other conduct these economic activities, which include production, consumption, exchanging financial values, economic management, trading commodities and services, etc. The outcome or output of these economic activities could be enhanced with the use of innovation. The global economy is now hunting for talents who can innovate. These talents would bring along innovation which would help the global economy to grow (Coccia, 2018).
As opined by Kremer (2020), today, the competitiveness across the national economies is based on innovation. Innovation can not only rule out the odds but also facilitate overcoming several challenges. Through innovation, the public as well as private investments increase. Innovation facilitates better investment and investment fosters innovation. Therefore, these two share a close interrelationship. The adoption of the system wide approach to innovation would promote learning and foster global engagement. The best part of competing through innovation is that both the sides actually win. On one hand, the parties emerge stronger than before. On the other hand, they grow more prosperous. However, both sides would miss out on the opportunity to grow if they do not take the call of innovating.
Debate related to the topic
As stated by Zhaoet al (2021), innovation is crucial in the global competitive economy as it fosters productivity and economic growth. However, innovation and its impact, is a debatable topic when it comes to the global economy. Opponents believe that innovation leads to global tension, inequality and environmental degradation. Due to innovation, the level of competitiveness increases among the national economies. This can sometimes grow into an unhealthy competition. Innovation enables the organizations to remain relevant in the ever-changing and competitive market. However, this hunger for growth and prosperity also lays huge burden on the employees in the organizations. The organizations expect their employees to constantly innovate. If the employees are unable to innovate, they lose their importance to the organization. Therefore, the constant urge to compete and grow, creates the pressure to innovate. According to Ponnampalamet al (2019), innovation has the potential to resolve several critical issues. The solution or answer to several critical issues lies in innovation. The developing nations have resorted to innovation to resolve their issues and grow. However, it is also true that innovation leads to various problems. Most of the innovators fail or overlook the cost of innovation. Innovation absorbs a lot of resources and also needs money. Extensive and aggressive innovation strategies often drain out huge resources and money. The innovators should also keep in mind that even the radical innovations fail. There could be an instance when an organization makes huge investment in innovation, launches a new product or service and it fails. Therefore, before investing heavily in innovation the organizations and nations need to plan diligently.
Literature Review
The global economics as per Shelomentsevet al (2021), includes all the economies and humans across the globe. Innovation is an important part of global economics. Innovation is a crucial catalyst in the process of economic growth. It drives economic progress of the nations. The businesses, consumers and economies are benefitted through innovation. Therefore, the concept of innovation and its significance in global economics should be promoted. Innovation involves developing new ideas and technologies and applying them. This application of innovation would result in improvement of the commodities and services as well as making the productive process more efficient.
According to Crowley and Bourke (2018), history is a proof that innovation leads to economic growth and development. Global economics has benefitted due to innovation. The invention of the steam engine is nothing but innovation. The world has reaped the benefits of this gift of innovation from the 18th century. The innovation facilitated better production in the factories. It also led to higher mass production. The innovation of steam engine has revolutionised the process of transportation. The railways developed and facilitated better trade. Eventually, the emergence of information technology (IT) as an innovation has also given several benefits to the global economies. The process which the organizations implement for production of the commodities or services they offer for sale, have changed due to innovation and IT. This has introduced new business models and also benefitted the organizations and economies by opening the gateway to new markets.
As opined by Hu (2021), the main advantage of innovation to global economics is that, it has led to economic growth. Innovation ensures higher productivity which implies that a larger amount of output will be generated with the same level of input. The increase in the productivity results in more commodities and services being produced in the economy. This is a continuous process and gradually helps the economy to grow.
However, there is always a negative side to things and innovation is not an exception. The new ideas are gifted by innovation. It also brings along new technologies. These ideas and technologies are applied by organizations which leads to economic growth of various national economies. However, the global economy as a whole faces the adverse impacts of innovation. As per Ding, Atallah and Sun (2021), the global economy is driven by the spree to innovate. In doing this, they are neglecting the environment. Innovation has showed the world how technology can facilitate economic progress. Hence, to bring about this progress and change, the world is moving very fast, disregarding several crucial aspects. The issues like global warming, climate change, greenhouse effect, etc. are caused by urbanisation, industrialisation and globalisation, which are led by innovation.
Arkolakiset al (2018) said that innovation leads to economic growth of the global economy but at the cost of humanism. The various national economies are indulging in unhealthy competition and are trying to acquire each other’s resources through economic power. The global economy is progressing steadily, however, the humans or the workforce is facing huge challenge in coping up with the innovations. The innovators are under constant pressure of innovating and creating something new. On the other hand, the employees at the grassroot level or above are finding it very difficult in coping and addressing these changes induced by innovation. The change management skill is not equally present in everyone. Innovation leads to continuous changes in the operations and its process. Thus, the employees need to constantly upgrade themselves to meet the expectations of their organizations. The ones who fail to update themselves, grow significant and often lose their jobs. On one hand, innovation stimulates the wage rates, productivity and employment opportunities. On the other hand, it leads to job pressure, unfair competition and unemployment.
As per Zmiyak, Ugnich and Taranov (2020), innovation results in inequality. The nations and the organisations which are able to innovate are the ones who are wealthy and are growing. The rest of the nations or organisations which are unable to innovate, are lagging behind. This results in the disparity in income and wealth distribution. The organizations or the nations which are not investing adequately in research and development (R&D) are missing out the opportunity which innovation brings along. Therefore, they remain economically backward compared to the other developed nations who are aggressively innovating. Only the innovators are able to make more money and grow. This inequality created by innovation is a negative impact affecting the global economy.
Unresolved Problem
Innovation makes businesses more profitable. It helps the global economy to grow. However, the problems created by innovation like environmental degradation can be resolved through sustainable technology. When innovation is made keeping sustainability in mind, it will ensure economic growth along with preservation of the environment and resources. Innovation should be used in a positive and ethical manner (Owen, Brennan and Lyon, 2018). This will prevent the global tension and reduce the pressure on workforce. The economies would innovate but not to acquire each other’s wealth or resources. Innovation should be for an overall social and economic development rather than economic and political aggressive competition. The workforce should be prepared to adapt to the changes rather than terminating them. The new employment opportunities should be created through innovation instead of closing existing jobs and replacing it with machines. Innovation can be promoted through effective research and development. The social and ethical consideration would facilitate use of innovation for economic progress.
Conclusion
It can be concluded that innovation is necessary for the global economy to grow. Innovation needs to be diffused into the supply chain and operations. However, innovation has certain negative impacts on the global economy. It leads to economic inequality, oppressing humanity, environmental issues and global or political tensions. These problems can be resolved through sustainable innovation and meeting ethical commitments. The organizations and economies need to invest in R&D, train their workforce accordingly and allocate required resources.
References
Arkolakis, C., Ramondo, N., Rodríguez-Clare, A. and Yeaple, S., 2018. Innovation and production in the global economy. American Economic Review, 108(8), pp.2128-73.
Coccia, M., 2018. The origins of the economics of innovation. Journal of Economic and Social Thought-J. Econ. Soc. Thoug.–JEST, 5(1), pp.9-28.
Crowley, F. and Bourke, J., 2018. The influence of the manager on firm innovation in emerging economies. International Journal of Innovation Management, 22(03), p.1850028.
Ding, L., Atallah, G. and Sun, G., 2021. Global supply chain relationship, local market competition, and suppliers’ innovation in developing economies. Technological and Economic Development of Economy, pp.1-27.
Hu, G.G., 2021. Is knowledge spillover from human capital investment a catalyst for technological innovation? The curious case of fourth industrial revolution in BRICS economies. Technological forecasting and social change, 162, p.120327.
Iqbal, B.A. and Rahman, M.N., 2018. The economics and econometrics of global innovation index. In Handbook of research on strategic innovation management for improved competitive advantage (pp. 236-246). IGI Global.
Kremer, M., 2020. Experimentation, innovation, and economics. American Economic Review, 110(7), pp.1974-94.
Owen, R., Brennan, G. and Lyon, F., 2018. Enabling investment for the transition to a low carbon economy: Government policy to finance early stage green innovation. Economics assignment Current opinion in environmental sustainability, 31, pp.137-145.
Ponnampalam, E.N., Bekhit, A.E.D., Bruce, H., Scollan, N.D., Muchenje, V., Silva, P. and Jacobs, J.L., 2019. Production strategies and processing systems of meat: Current status and future outlook for innovation–A global perspective. In Sustainable meat production and processing (pp. 17-44). Academic Press.
Reddy, K., Chundakkadan, R. and Sasidharan, S., 2021. Firm innovation and global value chain participation. Small Business Economics, 57(4), pp.1995-2015.
Rosario, A.M.F.T. and Cruz, R.N., 2019. Determinants of innovation in digital marketing. Journal of Reviews on Global Economics, 8, pp.1722-1731.
Shelomentsev, A.G., Goncharova, K.S., Stepnov, I.M., Kovalchuk, J.A., Lan, D.H. and Golov, R.S., 2021. Strategic Innovation as a Factor of Adaptation of National Economies to the Development of Global Value Chains. Sustainability, 13(17), p.9765.
Zhao, J., Shahbaz, M., Dong, X. and Dong, K., 2021. How does financial risk affect global CO2 emissions? The role of technological innovation. Technological Forecasting and Social Change, 168, p.120751.
Zmiyak, S.S., Ugnich, E.A. and Taranov, P.M., 2020. Development of a regional innovation ecosystem: the role of a pillar university. In Growth poles of the global economy: Emergence, changes and future perspectives (pp. 567-576). Springer, Cham.
