Innovation and Economic Growth: Factors that Encourages Innovation

The goal of this paper is to analyze the role played by innovations on economic activity. In this sense, the relationship between innovation and economic growth is studied, being economic growth the current main objective of economic policy to reduce unemployment and to increase social welfare. To carry out this analysis we base on Schumpeter's model, playing entrepreneurship and social climate an important role in the process. The empirical analysis an innovations equation for the case of 11 developed countries is included, showing that the social climate, represented by the training and income distribution, and monetary policy, represented by money supply, stimulate innovations.