Technological innovation has become a major driver of economic change. Innovation relies on intangibles, such as creativity, knowledge and experience. These intangibles are the most valuable resources of our time, much as raw materials were during the early times of industrialization.


The traditional importance of material resources has therefore been supplanted by intangibles that in many ways support innovation. Those intangibles have become socioeconomic resources in their own right, taking the privileged role that was once accorded to raw material resources. Nations and locales that can manage to nurture, reproduce and expand those resources are bound to become sources of innovation.


There are three forces that make innovation important in today’s world. One is the need to achieve reductions in time, effort and space in most every human activity. Time, effort and space are often interrelated, and collapsing one of them in any significant way usually affects the others. Most any innovation that collapses any of these three factors also reduces costs. The introduction of e-mail, for example, reduced the time needed to send a letter to almost nothing, it eliminated the effort associated with processing and carrying the letter, and it also managed to shrink geographical space by allowing instantaneous transmission. As a result, the costs associated with sending a letter were reduced substantially. We might therefore say that the socioeconomic importance of any innovation is related to how strongly it collapses time, effort or space.


A second force is the need to increase the pace of innovation. Globalization and competition have created more pressure to accelerate the speed of innovation in many economic activities. Increasing the pace of innovation requires improving the intangible resources that support innovation. It also requires placing more emphasis on research and development (R&D), and finding faster ways to introduce innovations to markets. An example of the efforts being made to increase the speed of innovation is the division of many research departments into first- and second-mover research units. First-mover research units are oriented toward invention and finding discoveries that can be patented. Second-mover research then seeks to adjust, modify or find uses for the discoveries and inventions produced by the first-mover units. Another example is the formation of research alliances between firms in highly innovative activities, such as biotechnology, to gain access to more knowledge and resources and speed up the pace of innovation.


The third force making innovation more important is the need to improve the technological base of many nations and economic activities. Globalization has made it necessary to project the innovative capabilities of nations, regions, industries and firms as never before. More than at any previous time, innovation has become a major tool in the race to create jobs and increase incomes. As a result, many nations, regions and locales are trying to find ways to bolster the intangibles that support innovation. Increasing the quality of technological education and building the kinds of infrastructure that can directly tie into innovative activities are examples of some of those efforts (for additional insights on those aspects, visit


The economic and social dimensions of technological innovation are therefore expanding their scope and becoming more important. It may not be long before indicators of innovation come into regular use and become as noticeable as those now published regularly to provide information on incomes, population or public health. By providing an indicator of innovative potential, the concept of innovative capacity can help chart the economic and social dimensions of technological innovation.


For a discussion of possible uses of the concept of innovative capacity, see Real World Applications.

For published work on the concept, see Publications.




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