The Role of Innovation in Driving Economic Growth: A Conceptual Framework

Shahiszan Ismail and Noor Zahirah Mohd Sidek
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Shahiszan Ismail: Faculty of Business and Management, University Technology MARA, Cawangan Kedah, Kampus Sungai Petani, Malaysia
Noor Zahirah Mohd Sidek: Faculty of Business and Management, University Technology MARA, Cawangan Kedah, Kampus Sungai Petani, Malaysia

International Journal of Research and Innovation in Social Science, 2025, vol. 9, issue 8, 6750-6759

Abstract: Innovation is widely acknowledged as a key factor of economic growth, yet the mechanisms through which it impacts economic advancement remain inadequately defined, especially within the context of developing economies. This study aims to construct a conceptual framework that demonstrates the role of innovation as a driver of economic growth, focusing on how technological advancements, process improvements, and product developments contribute to sustained economic expansion. This study employs a mixed-method approach, integrating existing literature on economic theory, case studies on industrial innovation, and empirical data on innovation-driven economic metrics. The framework developed here identifies key pathways by which innovation affects growth, including enhancing productivity, fostering competitiveness, and attracting foreign direct investment (FDI). The findings underscore that innovation not only improves productivity within firms but also boosts national economic performance by fostering a competitive market environment, reducing production costs, and facilitating entry into international markets. Furthermore, innovation-driven economies experience higher levels of job creation and increased self-employment opportunities, thus broadening economic participation. The study’s framework has practical implications, suggesting that policymakers should prioritize innovation-friendly policies, such as R&D subsidies, infrastructure investment, and education reform to stimulate a culture of continuous advancement and economic sustainability. However, limitations arise from the framework’s dependence on data primarily from developed economies, which may affect generalizability. Future research should focus on region-specific studies that assess the impact of innovation in diverse economic contexts, thereby refining the relevancy of this framework to various stages of economic development.

Keywords: innovation; economic growth; competitiveness; productivity; development (search for similar items in EconPapers)
Date: 2025
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