Fundamental Conditions for Innovative Development of The Economy

Abstract

Narrative-based study of the Russian innovation system makes it possible to identify the institutional and historical patterns of its development. In modern conditions, innovative development is the only acceptable option for economic orders that ensure a high level of well-being of the population. Innovative development is defined as the improvement of the economic and social living conditions of the population, which is based on the generation and use of new knowledge and new technologies in the process of value creation. The article demonstrates that the very possibility of innovative development arises and is maintained under three simultaneous fundamental conditions: 1) economic and political stability; 2) entrepreneurial initiative; 3) mechanisms of increasing returns. In addition to the mentioned fundamental conditions there are two critical prerequisites that serve as a kind of link between these conditions: market infrastructure development and science and education development. Innovative development is impossible and social order is getting stagnant in case at least one of these fundamental conditions is not fulfilled. Ensuring the three fundamental conditions depends on economic policy, which must take into account the historical, cultural and institutional features of the particular social order development.