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To what extent do market failures result in a similar optimal allocation of resources to the innovation process? What might EU Policy do to correct such failures?
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To what extent do market failures result in a similar optimal allocation of resources to the innovation process? What might EU Policy do to correct such failures? Innovation has a crucial impact on the standards of living in particular economy. It is generally agreed that research and innovation are the main sources of growth and job creation in market economies. i.e. output is increased through greater acquisition of knowledge. Subsequently, 2 things matter for economic growth: savings and the state of the productive knowledge (i.e. shows how productivity the extra capital will be used). The production function diagram below can illustrate this Where labour productivity per worker experiences diminishing marginal returns This diagram shows how economic growth can be realised by accumulation of capital and/or higher levels of knowledge. It should be noted that productivity growth is the difference between the growth of inputs and the growth of outputs and that technological progress...
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