Page 52 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.79, # 1, 2022, pp. 50-68

II. LITERATURE REVIEW
There is vast literature devoted to the economic development of countries. However,
in this paper, I have focused on studies that investigate innovation, innovation
development, and innovative economic growth. So, the term "innovation" was first
introduced into the scientific community as a new economic category by the
economist Joseph Alois Schumpeter (1883-1950) in his "Theory of Economic
Development" (1911) [T.Albert, Innovation, p. 4]. In his work "The Theory of
Economic Development," Y.A. Schumpeter considered innovation as an economic
impact on technical changes [I.P. Stepanova, Innovative Management, p. 9].
Schumpeter was probably the first scholar to theorize about entrepreneurship, and
the field owed much to his contributions. His fundamental theories are often referred
to [Fontana, Roberto (2012)] as Mark I and Mark II. In Mark I, Schumpeter argued
that the innovation and technological change of a nation come from the
entrepreneurs or wild spirits. He coined the word Entrepreneurship, German for
"entrepreneur-spirit", and asserted that "... the doing of new things or the doing of
things that are already being done in a new way" [Mansfield, Edwin (May 1983)]
stemmed directly from the efforts of entrepreneurs.

Schumpeter tried to find the essence of innovative entrepreneurship in the
production function and studied the foundations of the theory of innovative
processes. Schumpeter emphasized the role of the entrepreneur in the innovation
process, calling it the link between invention and novation, and he viewed
innovation as a change in technology and management. Y.A. Schumpeter was the
first economist to declare that technological development has a significant impact on
economic growth. He noticed technological development as a means of competition
between firms. Schumpeter's approach differs from the neoclassical approach in that
he expands the concept of innovation to include technological innovation not only as
the use of new technologies at the production stage, but also as the production of a
new product, opening a new market, organizing a new market, searching for new
sources of raw materials, as well as logistics and the emergence of new forms of
market supply.

Schumpeter proved that the central figure of the economy and its driving force is
innovative entrepreneurship. According to Schumpeter, innovation is the change or
replacement of consumer goods, means of transport, and organizational forms of
markets and industry. Also, Joseph Schumpeter described development as historical
process of structural changes, substantially driven by innovation which was divided
by him into five types:

1. Launch of a new product or a new species of already known product;

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