კონფერენცია

∘ George Berulava ∘
ON INNOVATIONAL AND INSTITUTIONAL PRECONDITIONS OF ECONOMIC GROWTH

Summary

The paper considers the role innovational and institutional development process for the economic growth.

The paper discusses the Schumpeterian and Austrian economic school’s approaches to economic growth. According to these approaches, the key microeconomic prerequisite of economic development and growth is the availability of firms capable of learning and appropriating knowledge, making entrepreneurial discovery and implementing of innovations, disrupting markets and earning supra profits.

The availability of innovators, in turn, depends on the ability of the country to ensure institutional environment, in which that supra profits for innovators are sustained enough to compensate higher costs associated with innovations. In this context the success of a developing country in the creation of institutional framework that provides favorable incentive structure for innovative firms, explains in the end its success in the economic development process. The countries that failed to provide such an incentive structure also failed to catch up with wealthy countries.

Thus, the key question of the economic development policy should be identifying a set of institutions and actions that produce business or institutional environment, which will guarantee supra profits for innovators and thereby provide a proper incentive structure for firms to invest in innovations.

Ivane Javakhishvili Tbilisi State University Paata Gugushvili Institute of Economics International Scientific C O N F E R E N C E S "ECONOMY – XXI CENTURY"

E ISSN 2587 - 4691	∘ George Berulava ∘ ON INNOVATIONAL AND INSTITUTIONAL PRECONDITIONS OF ECONOMIC GROWTH Summary The paper considers the role innovational and institutional development process for the economic growth. The paper discusses the Schumpeterian and Austrian economic school’s approaches to economic growth. According to these approaches, the key microeconomic prerequisite of economic development and growth is the availability of firms capable of learning and appropriating knowledge, making entrepreneurial discovery and implementing of innovations, disrupting markets and earning supra profits. The availability of innovators, in turn, depends on the ability of the country to ensure institutional environment, in which that supra profits for innovators are sustained enough to compensate higher costs associated with innovations. In this context the success of a developing country in the creation of institutional framework that provides favorable incentive structure for innovative firms, explains in the end its success in the economic development process. The countries that failed to provide such an incentive structure also failed to catch up with wealthy countries. Thus, the key question of the economic development policy should be identifying a set of institutions and actions that produce business or institutional environment, which will guarantee supra profits for innovators and thereby provide a proper incentive structure for firms to invest in innovations.