5.5 Innovation
Innovation—a new idea, device, or method—affects markets in many ways. Over the past century, new product innovations such as antibiotics, television, jet aircraft, personal computers, and the Internet have transformed the way we live and do business.
Process innovations, which improve the method of production for existing products to increase output, occur much more frequently than new product innovations. For example, the life-saving innovations in the Mini-Case “Malthus and the Green Revolution” include process innovations such as irrigation, expanded use of fertilizers, and optimal crop rotation that greatly increased food production.
Organizational innovations—new ways of organizing firms—also increase output. For example, ...
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