NEW KNOWLEDGE: THE DRIVING FORCE OF INNOVATION, ENTREPRENEURSHIP, AND ECONOMIC DEVELOPMENT

The claim of this paper is that new knowledge- specifically, the creation of economically useful knowledge is the main driver of innovation: that innovation is what generates economic development: and that the institutional arrangements (referred to as innovation systems) that support innovation and entrepreneurial activity vary across time and space. The paper traces the evolution of the U.S. national innovation system, the locus and nature of innovation, and the role of entrepreneurial activity over the last two centuries. The analysis shows that technologies and institutions co-evolve and that innovation systems are dynamic and path-dependent phenomena. It also shows that the function of innovation systems is not only to create or absorb ideas but also to turn ideas into innovations and commercialize them. JEL- codes: A,-,-