QUESTION

a) Provide a definition of 'technological capability' and 'social capability' and describe the differences between them (5 points). Why can we say that innovation has a 'systemic' nature? (3 points).

b) Financial development, social capital, favourable business regulation, trade openness are different aspects of 'social capability' influencing innovation processes and, therefore, economic development. Make a ranking of these factors according to their observed degree of importance for economic development. Explain why 'inclusiveness' and 'equality in opportunities' can strengthen the innovation capability of an economy (5 points).