Author:Saparaliyev, Daulet


Innovations are an indispensable element of the functioning of the economy, where without the innovation component it is impossible to achieve effective development of the production and non-production areas of the economy. The European Commission sees innovation as the core of entrepreneurial initiative: Almost any company owes its foundation, at least in relation to its competitors on the market, to an innovation. Innovations are the global motor for economic growth and represent at the same time the key factor for more competitiveness (Kongyrbay et al., 2017). The development and introduction of innovative technologies in the areas of production and circulation, new ways of organizing and managing enterprises have become key factors in market competition, a strong means of increasing efficiency and improving the quality of goods and services (Chiles et al., 2004). One of the important conditions for such transition is the development and formation of the economy of knowledge and high technologies, to which such spheres as education, high-tech medicine, research and development, which develop and implement innovations, are related (Saiymova et al., 2018). Without the introduction of innovations in these segments of the services market, it is impossible to achieve the main mission of the innovation policy-raising the quality of life of the population. However, technical progress alone is not sufficient in order to innovate with longtime success. Innovation also means predicting market needs, offering better quality and/or additional services, organising efficiently, meeting deadlines and controlling costs. So the term innovation becomes more and more a widely spread phenomenon and instrument. It represents an answer to continuous technical, economic, ecologic, social and political changes (Saiymova et al., 2018). At present, in global terms, the problems of interaction and interpenetration of the processes of innovative development in different sectors of the economy (including services) and the quality of life of the population of the state are important and widely discussed (Acs et al., 2009; Marcati et al., 2008; Guan & Chen, 2010).

In the literature, there are two theories of innovation that have been evaluated variously and comprehensively depending on the realities of the market economy. The first classic theory of innovation, called the "linear model", was one of the pillars and first theories in innovation studies. According to Laestadius et al. (2008), Bush is considered to be the one who developed the first "linear model" and its role in innovation. Godin (2014) held the same opinion that Bush founded the linear model where a sequence of processes is considered as one. The "linear model" implies that the process of innovation takes place in consequent steps, research and development, with two approaches-either to develop technology or to meet the demands of the realities of the economy. This theory advances interrelated phases of processes that create a cycle, applying fundamental research and development to products and/or services (Clark, 2002). There are several approaches to this theory, such as technology and supply push (when research and development drive the launch of new products) and demand pull (when the government, market or society demand innovations for a solution to a problem) and large-scale innovation (when government encourages innovation activity) (Nemet, 2007). Godin (2014) viewed the "linear model" as improving management and production outcomes, and the demand-pull approach as a critical view against the technology push approach. The latter is considered to be an "unclear" process. The criticism focused on the demand level and rate, which built the interaction with the ultimate consumers (Nemet, 2007). The other approach of the "linear model" is to consider it on a large scale, on the level of a country, i.e., when a country focuses on creating a favorable and successful environment for the innovation activities of firms, companies and industry (Foxon, 2003).

The second comprehensive theory in innovation is related to the emergence of a systemic approach. This theory considers that a unit contains interrelated and interdependent parts (Jacob et al., 2006). In its turn, the systemic innovation theory, at the end of the 20th century, was viewed as complex, interrelated processes. The systemic approach to innovation can be applied at different levels including supranational, national, regional, local, and sectorial levels. The innovation system theory involves complex work by different stakeholders, institutions and organisations to produce and spread innovation. The role of institutions is to minimize uncertainties in the innovation process and to encourage innovation activities. This theory maintains that innovation happens when all of the prerequisite conditions are present (Greenacre et al., 2012). These conditions include a proper R&D sector, public investment in R&D, quality and commercialization of research, a strong educational system, innovation subsidies and tax incentives, the building of platforms and linkages, rising consumer awareness and other specific courses of action and public policy efforts (Lundvall & Borras, 2005). For instance, OECD reported that businesses innovate when they have the motivation and capacity to do so (OECD, 2005). When these motivations and capacities are present, an innovative environment is created. Government has the important role of creating and maintaining these positive conditions; however, if incentives are used inappropriately, this can have a negative effect on businesses as it may create unfair competitive conditions and additional bureaucracy (Patanakul & Pinto, 2014). Furthermore, a lack of financial, technological and human qualified resources, a lack of strategies and clear goals, and the existence of corruption, might hinder the development of innovation (Karatayev et al., 2016; Karatayev et al., 2017a: 2017b) and impact on socioeconomic and environmental outcome (Koshim et al., 2018; Rivotti et al., 2019). The innovation system theory encompasses all processes and actors as one whole unit, leading to a set goal (Balzat, 2003; Kongyrbay et al., 2017).

The relationship between innovation and productivity and the extent to...

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