Innovation is the creation of better or more effective
products, processes, services, technologies, or ideas that are accepted
by markets, governments, and society. Innovation differs from invention
in that innovation refers to the use of a new idea or method, whereas
invention refers more directly to the creation of the idea or method
itself.
In business and economics, innovation is the
catalyst to growth. With rapid advancements in transportation and
communications over the past few decades, the old world concepts of
factor endowments and comparative advantage which focused on an area’s
unique inputs are outmoded for today’s global economy. Economist Joseph
Schumpeter, who contributed greatly to the study of innovation, argued
that industries must incessantly revolutionize the economic structure
from within, that is innovate with better or more effective processes
and products, such as the shift from the craft shop to factory. He
famously asserted that “creative destruction is the essential fact about
capitalism. In addition, entrepreneurs continuously look for better
ways to satisfy their consumer base with improved quality, durability,
service, and price which come to fruition in innovation with advanced
technologies and organizational strategies.