Quality Growth: From Process to Product Innovation Along the Path of Development

Esteban Jaimovich

No 1016, School of Economics Discussion Papers from School of Economics, University of Surrey

Abstract: We propose a demand-driven growth theory where process innovations and product innovations fulfil sequential roles along the growth path. Process innovations must initially set the economy on a positive growth path. However, process innovations alone cannot fuel growth forever, as their benefits display an inherent tendency to wane. Product innovations are therefore also needed for the economy to keep growing in the long run. When the economy fails to switch from a growth regime steered by process innovation to one driven by product innovation, R&D effort and growth will eventually come to a halt. However, when the switch to a product innovation growth regime does take place, a virtuous circle gets ignited. This happens because product innovation effort not only keeps growth alive when incentives to undertake process innovation diminish, but it also regenerates profit prospects from further process innovation effort.

JEL-codes: O30 O31 O41 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2016-07
New Economics Papers: this item is included in nep-cse, nep-gro, nep-ino, nep-sog and nep-tid
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Related works:
Journal Article: Quality growth: from process to product innovation along the path of development (2021)
Working Paper: Quality Growth: From Process to Product Innovation along the Path of Development (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:sur:surrec:1016

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