Exam Review - Exam 1 Information 1 Foundations of an...

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Exam 1 Information 1. Foundations of an Innovative Society Definition of innovation: the recognition of opportunit for profitable change and the pursuit of those opportunities all the wa thorugh to their adoption in practice. It can be tangible or intangible. Four conditions for creating an innovative society 1. Rewards for productive activity: there is innovative and replicative entrepreneurship. Rule of law, avoiding onerous taxes, having a proper regulation, rewarding new ideas, subsidizing research, commerzializing innovation in universities and rewarding imitation. Important Institutions: law, IP protection, taxes, reward mechanisms 2. Easy to start and grow business: this includes lowering the cost of formalities such as the registration process and the ease of hiring workers, habing a workable bankruptcy facilitate growth. 3. Keep winners on their toes: openness of the market and antitrust laws. Antitrust Laws are mechanisms to avoid monopoly behavior of firms with a innovation Stimulation of trade and investment prevents monopolies from occurring 4. Disincentives for unproductive activity: not allowing companies to get mone from the government through manipulation such as rentseeking and unproductive behavior Challenges associated with implementing reforms: this deals diffently with developing and undeveloping nations o Developing Nations Must ensure low cost Accelerate process in the appropriate registry It is simpler to do business without approval Avoiding dead capital Avoid wastes and inefficiency Developed countries- political decision-making is inefficient, Undeveloped countries- status quo benefits those who control resources 2. Types of Innovation and Integrated Strategy: Baumol’s 3 types of entrepreneurship o Productive: a new product that makes society better off o Unproductive: There is no effect on society. You don’t make it either worst of or better off, you just make yourself richer o Destructive: Makes society poorer, it avoids success in the population and makes society more dangerous Schumpeter’s definition of innovation and types of innovation: o New good o New method of production o Opening a new market o Conquest of a new source of supply o New organization Expanded Version Acording to Baumol technology transfer, modifications of technology, geographic allocation of technology Unproductive and destructive innovation
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Rentseeking: an individual, organization or firm seeks to earn income by capturing economic rent through manipulation or exploitation of the economic or political environment Allocation of effort between productive and unproductive activities: the rules of the game meaning the wa the laws and the policies are made that make entrepeneurs decide wether to choose a productive or an unproductive activity. This deals with incentives for innovators. Some questions are: o Is it worth is to invest?
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