Innovation+growth in Global Economy

Traditional growth theory emphasizes the incentives for capital accumulation rather than technological progress; innovation is treated as an exogenous process or a byproduct of investment in machinery and equipment. Grossman and Helpman develop a unique approach in which innovation is viewed as a deliberate outgrowth of investments in industrial research by forward-looking, profit-seeking agents. They also devote attention to the place of international trade in the growth process, including the transmission of innovations from the industrial economies to the LDCs. Grossman and Helpman provide a useful overview of recent analyses of innovation and growth, enriching and expanding the available formal theory in a number of important ways. They develop straightforward theoretical models that treat innovation as the outgrowth of costly investments in industrial research. Such investments respond to profit opportunities, which reflect competitive conditions in national and international product markets. Since firms in different countries race to bring out new products, growth processes are linked by international technological competition. An important aspect of Grossman and Helpman's study, even in relation to recent similar work on endogenous growth, is that they focus on the growth process of a country that operates in a global economy. They allow comparative advantage to be created endogenously in the industrial research laboratory but look at the dynamic determGrossman, Gene M. is the author of 'Innovation+growth in Global Economy' with ISBN 9780262071369 and ISBN 0262071363.