Abstract
Key factors driving self-sustained,
long-term economic growth are innovation and technology
absorption; these factors are generated from within the
economic system, responding to economic incentives. This
conceptual framework molds analysis: on the one hand, the
view of the centrality of innovation and knowledge creation
in the growth process and, on the other hand, the
understanding that these are economic factors that may be
shaped and influenced by properly designed economic
policies. For the purpose of this knowledge brief,
innovation can be defined as the development and
commercialization of new unproven technologies and untested
processes and products, and absorption as the application of
existing technologies, processes, and products. The ability
of an economy to research and develop new technologies
increases its ability to understand and apply existing
technologies. Vice versa, the absorption of cutting-edge
technology inspires new ideas and innovations.