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Innovations and Economic Development

Introduction: Innovations and Economic Development 

Innovation is the modification of an existing notion or the creation of a brand-new idea to meet a need. The formation of an R&D department is the best example of how innovation is an essential component of any business. An enormous volume of money is also allocated to the creation of original concepts. Innovations first and foremost enhance industrial processes. Businesses can improve their efficiency and decrease production losses by implementing the most recent manufacturing techniques. A rise in output from this will bring growth. In any country, innovation creates new employment prospects. Increased employment frees up wasteful resources for optimal use, resulting in new production. The addition of new production facilities results in greater economic growth. Any nation will eventually develop as a result of sustained economic expansion.

The key feature of the essay will discuss the trade-off between structural change, innovation, and inclusion and how these affect the design of appropriate policies. In the literature review of the essay the conventional industrial policies, and their emphasis on manufacturing, be applied to developing countries to foster structural change, and the comprehensive outcome is briefly discussed. The critical evaluation is done upon the questions such as what capacity that involved in conditions of strategy instrument and what problems and obstacles are policymakers expected to face. The essay considered an example of a country Bangladesh (Malecki, 2018).

Literature review 

The trade-offs between innovation, structural change, and inclusion

The structural change in economies and society will induce innovation which is significant for the development of the country's economy. The outcome of the structural change in innovation is affecting inclusively and exclusively the growth of the economy. The challenges to reduce poverty and help the backward sector in a developing country is dependent on income gains. The productivity and growth of the nation are increased through innovation which will have several consequences related to the distributional channels. In different conditions, the innovation leading to the structural changes can be less or more effective. The characteristics of the technologies play an important part in showing the capabilities through the intensity and scales, demands, and geographical features. The different types of innovations adopted by the action-takers and innovative managers significantly influence the four different forms of innovation that impact inclusion and structural change. The higher state of inclusion will potentially of the structural change for the growth in the economy. More people involved in the process of innovation will enhance the future capabilities related to technology in developing countries such as Bangladesh.

Relationship between innovation, structural change, inclusion

Figure 1:  Relationship between innovation, structural change, inclusion

The dedicated pursuit of efficiency, however, can occasionally backfire. If not taking caution, one can end up becoming more skilled and effective at less important jobs. This is especially true for the idea of innovation because anything truly unusual and one-of-a-kind cannot be measured using conventional methods. People must learn to strike a balance between productivity and originality. Persons who work in business conditions that is steady and conducive to productivity. However, due to several unforeseen economic, social, and political upheavals, the business environment in developing countries is typically more unstable than those in Western markets. Despite the tendency toward collaborative invention, individuals continue to primarily gain from innovation (Khan, 2018). Every day, managers and leaders in government must make difficult choices and trade-offs. A sense of being shackled or forced into a deadlock might result from the pressure of balancing trade-offs between innovation. With the right tools, it may change how to perceives various possibilities and, occasionally, break free from the constraints that trade-offs impose.

The structural shift modifies the presumptions that guide decision-making, for example, by changing how market orders are handled. Innovating is the main force behind structural change. The economic sectors with strong Research and Development (R&D) components may have an impact on the current methodology. New economic trends, global shifts in the sources of capital and labor, changes in the availability of resources due to war or natural disasters, changes in the demands and supplies of all resources, and changes in the political environment due to the emergence of a new government in power or significant changes to existing laws, particularly about the regulation of business, are additional factors that could cause structural change. The drop in the cost of trade, which includes tariff reductions, improvements in communication technologies, and decreased transportation costs, is the most frequently cited explanation for the sharp increase in the ratio of trade to GDP (Altman, 2018). However, there is another element that influences the general openness trend but is not studied by researchers: The percentage of global spending on services has been steadily and significantly rising. It is well known that this phenomenon, sometimes known as "structural change," is a crucial component of economic expansion and development. However, structural change has delayed the growth of international trade and the potential advantages of trade integration because services are sold on a much smaller scale than products (right panel).

Change in Structure & Inclusion 

The imbalances that come along with structural change, such as capital accumulation replacing foreign labor, knowledge, and skills for domestic people:

  • It increases income inequality in the short term.
  • Lessens the prevalence of poverty
  • Creativity and Diversity
  • There are winners and losers in innovation.
  • Distribution of income
  • Economical innovation
  • Grass-roots
  • Innovation might increase inequality, but it also might have an impact on social mobility.
  • A crucial element of (economic) progress is innovation.
  • The advancement of economics depends on structural changes.
  • Disruptive innovation is often conceivably a factor in distributional effects

While structural improvements and economic growth tend to reduce poverty, the extent of the reduction will depend on how money is distributed. The concept of inclusive innovation is unclear, and there is little understanding of how it might be implemented (Raihan et.al. 2022).

Analysis/case study 

The trade-offs between innovation, structural change, and inclusion affecting the design of appropriate policies

While everything is theoretically feasible, not everything ought to fall under the same category. Not every problem needs to be solved immediately, and not every problem should be solved quickly. It is crucial to decide which issue want to be addressed first and what you can scope out for incremental updates (Pan et.al 2019). The major effects of the design of the appropriate policies are:

  • Length: Is there enough time to build this feature? Does it matter if it's twice as useful but takes ten times the time?
  • Cost: How much will it cost to develop the feature? Does it have a price tag and will it produce the desired results?
  • Priorities have a role in the tradeoff decision-making process. Due to occasional technical constraints, it may be employed to accomplish organizational objectives or to give user requirements priority over other considerations.
  • Comparing trade-offs to an informed choice can be more difficult.
  • Reaching compromise and alignment among the team members to work with is crucial when making a tradeoff decision (Qamruzzaman and Wei, 2018). It is crucial to persuade participants and team members from a variety of functional areas to agree on the importance of different components of the job.

Evidence that backs up the effects of inclusion on the process of innovation:

  • By planning initiatives that prioritize resolving the territorial and mature sector imbalances
  • By promoting macroeconomic redistributive measures that raise the income of individuals who are socially excluded as well as address income inequality as a whole. Additionally, they promote technological innovation driven by demand.
  • Ensuring "regulation of network alignments" in general collecting evidence (qualitative and quantitative) about the factors, people, and procedures that are most likely to lead to either exclusion or inclusion routes
  • Steering Reinforcing Mechanisms for an Interaction of New Ideas, Changes in Structure, and Inclusion
  • Strike a balance between the mechanisms that could result in innovation routes that are more efficient yet exclusive.
  • Steering and/or enhancing technology's beneficial effects on inclusion run the risk of waning and failing to create a positive feedback loop. analyzing the value of R&D and other conventional techniques for technology transfer in the context of LMICs (Low and middle-income countries like Bangladesh).
  • Despite how alluring it may be, the grassroots approach might not be the solution for LMIC inclusion in establishing sustainability and scalability requirements (Pomi et.al. 2021).
  • Spotting the potential for indigenous innovation and making sure that it can be scaled up and turned into an endogenous process to adapt to changes.
  • In addition to the Innovation System techniques, one might want to take a look at the framework for network alignment governance and perspectives on power dynamics.
  • Reconsidering how demand and macroeconomic factors affect the diffusion process.
  • This model should be followed by a novel and innovative approach to quantitative evaluation as well as the examination of the ICS indicators

The concept of Traditional industrial policies and their emphasis on manufacturing applied to developing countries nowadays to foster structural change and inclusive outcomes

The word "industrial policy" refers to the concepts, rules, and guidelines that have been developed by the government to steer, develop, and control industrial endeavours within the nation. To attain sustained economic growth the proposed Industrial Policy 2015 has been created to help both privately held businesses and labor-intensive SME industries. The primary objectives of the Industry Policy are to increase manufacturing growth to up to 25% from 18% to support inclusive economic growth and increase in industry's GDP contribution from 29 to 35 percent by 2021. The strategy also intends to increase the participation of women in the Bangladeshi workforce, facilitate FDI, and promote the process of import substitution as well as diversify Bangladesh's export-oriented manufacturing and specialized sectors. As part of the approach, several potential courses of action have been examined. To achieve the purpose that industrial strategies have, infrastructure for the industry is being planned and constructed. The government must prioritize implementation strategies based on deadlines and offer monetary rewards to export-dependent small enterprises and other non-traditional industries (Ilankoon et.al. 2018). By improving women's engagement in local industrial processes and export competitiveness, industrial growth can be made more effective.

The five biggest trade-offs of traditional industrial policies, and their emphasis on manufacturing, be applied to developing countries nowadays to foster structural change and inclusive outcomes in government are:

1: Lower regulatory burden vs. more protection or compliance

Choosing how to distribute the cost of regulation is one of the important decisions that governments must make (Iammarino et.al. 2019). When to choose between protection and compliance as aiming both objectives are appropriate; regulatory constraints should be reduced. The pursuit of one frequently comes at the expense of the others, though. 

2: Greater protection from. Greater comfort

To increase security, it is customary to put users through a set of requirements before granting them access. The compromise has been made. By using risk modelling, security may be increased without adding to the workload of those engaged. With the aid of data analytics, it is possible to employ stricter security and screening measures to identify particular persons (or groups) as being in danger and to expedite the screening and processing of those who are at low risk.

3: Superior service. Lower price

It almost seems ironic that adding more services or even providing better ones would demand more resources. It is a platitude in business that "you get what you pay for." Traditionally, the government has increased resources, including personnel, contact centers, time, and money, to extend and improve the quality of customer services (Murshed et.al. 2021). Government leaders frequently find this to be one of the most challenging trade-offs because employees at all levels are expected to "do more with less."

4: Greater personalization versus scale economies

Customers’ desire customized service, but it can be challenging to deliver it. It became increasingly challenging to give every single consumer the finest experience as the number of customers increased. The solution was too costly, used up too many resources, or just took too long to figure out what each person's unique needs and desires were (Raihan et.al. 2022). 

5: Greater transparency versus more privacy

In the modern era, analytics and data are incredibly powerful, especially when it comes to issue-solving (Sutradhar, 2020). The potential of data may expand with greater openness and transparency. However, some of the most urgent problems come from industries like health care, where concerns about security and privacy are particularly high.


What might that involve in terms of policy instruments? 

Both compliance and enforcement must be done to determine the parameters for the system of recyclable and nonrecyclable material, this policy instrument needs to be carefully examined. This strategy needs to be founded on a thorough assessment of the potential for recycled materials in the sector- or regional markets, which means answering questions like whether or not, and if so, the potential for the market in a particular area exists or not. When creating the policy instruments for recycled materials, the cost-benefit analysis for market development for all recycled products from both ecological and economic viewpoints must be taken into account (Ahamad, 2018). Numerous studies have demonstrated recycling's huge potential to reduce the amount of waste that is burned and disposed of.

Choosing an instrument

One of the best ways to guarantee the success of a policy and limit the impact of people on resources is to use the right policy instrument. Human requirements vary greatly, especially in the modern world, and to meet these demands, intersocietal cooperation is necessary as a result of trading and exchanges of resources, both raw and processed. However, if they are not effectively managed, the entire system may become unsustainable. The exchange and trade of resources may readily increase and extend the scope of the outlet process of the closed system of resources. The use of conventional instruments in the modern era could lead to the failure of a policy (Karim et.al. 2019). Before choosing the tool to implement the policy, it is often advisable to take into account the policy's objective as well as the community's obligation and commitment to it. To control the amount of resource flow and to lessen the effects of policy variations, several instruments are typically deployed. When implementing policies that need involvement from various governmental levels or a group known as a community network, a variety of tools must be used. The process of implementing policies may have challenges in governance systems at all different levels and stages. To achieve sustainable goals, the evaluation of policies is expected to explain how the selected instrument could help to reduce some of these problems. This review will also be required to go into detail regarding the policy-forming consultation process that the community network flaws in. So, to choose the best instrument and determine how it will affect the control of resource flows, the policy evaluation must look at the issues that must be resolved.

Critical findings of the essay 

Difficulties and obstacles are policymakers likely to face 

The focus of innovation policy in developed economies has changed over time, moving from post-World War II strategies that emphasized the creation of new inventions as a way to advance national prosperity to more recent mission-driven policies that emphasize the creation of workable solutions to particular problems. Lower middle-income countries (LMICs) such as Bangladesh are establishing innovation strategies as they transition to a knowledge-based economy against a backdrop of dynamic innovation ecosystems, new global challenges, usually hostile political environments, and growing global fragmentation.

Given the number of poor individuals in the nation, any person cannot spend money in that manner.

The Problem Prioritizing investment in R&D to address basic needs like enough food, clothing, shelter, health, and education is a good idea. However, people do not support anything unless it's quickly demonstrated to work. The Problems that the misalignment of corporate and political timeframes with innovation policies are:

Ample Remedy Arms-length Organizations (ALOs), emerging groups that operate mostly independently of the government solve problems that are Insufficient use of consensus-building in the creation and application of policies. Various Solutions engaging with business, governmental, and non-profit sectors to conduct a variety of consultations are explained in above.

 Bangladesh needs to build its business infrastructure to be able to endure the current crisis and experience a substantial recovery after the crisis because it is a small developing country and cannot have a large impact on the expansion of global trade. Improvement is required in five key areas in this regard:


The first is that, despite the government's announcement of stimulus packages for all concerned industries, the accessibility and benefits of the packages have continued to be imbalanced (Tasneem  and Biswas,  2015). There is agonize that, aside from the RMG, the majority of other export-dependent companies are encountering several challenges while utilizing the stimulus packages. This is also supported by the business survey on the Business Confidence Index that SANEM conducted in July. These problems include a lack of a detailed protocol for the industry-specific stimulus plan, issues with bank-related services, application-process understanding challenges, and corruption. To address these problems, prompt and efficient solutions are required.

In addition, Bangladesh faces a significant problem due to the lack of export diversification. Despite some pro-RMG biases in the programs and regulations, non-RMG industries are also being negatively impacted by ineffective and unreliable strategies and policies. Additionally, those working in non-RMG industries have been disproportionately impacted by the high cost of doing business (Roy et.al. 2017). A low level of productivity and skill development is also a result of insufficient public investment in education and health, which is not ideal for export diversification. Therefore, the current crisis may present policymakers with a chance to implement improvements in significant economic areas. Without a doubt, the goals of these reforms should be to reduce the cost of doing business and to foster the growth of non-RMG export businesses.

Thirdly, boosting exports and diversifying Bangladesh's economy are both hampered by the absence of FDI orientation. The high costs of doing business in Bangladesh, unfavorable regulations, bureaucratic red tape, uncertainty regarding the reform of the policy regime, insufficient enforcement of intellectual property rights, and the slow implementation of infrastructure projects, including SEZs, are barriers to attracting FDI. Therefore, reform efforts should concentrate on streamlining regulations, enhancing IPR, and accelerating and improving the execution of megaprojects and SEZs.

Fourth, Bangladesh will leave the LDC category in a few years. It will thus lose its trading rights in significant export markets. As a result, it needs to start talking about FTAs with its main trading partners (Mahajan, 2016). To ensure zero-duty trade pReferences for exports during the post-LDC transition period, Bangladesh should commence FTA discussions with the EU, India, UK, India, and China. It is crucial to remember that FTA talks take a long time, and it will take a lot of time and work to win specific clauses that safeguard Bangladesh's interests in these FTAs.

The last phase is that Bangladesh losing its LDC designation in 2024 will result in the loss of trade preferences for significant export markets as well as other preferential agreements (i.e. the TRIPs waiver of pharmaceuticals) (Helal, and Hossain, 2017). As a non-LDC, Bangladesh is anticipated to see harsher trade controls. There is a need to reevaluate the LDC decision on graduation as the Covid-19 situation prompted Bangladesh to reconsider its stance and forced Bangladesh to act in the background. Bangladesh may think twice about delaying the transition to LDC classification for three years given the ongoing crises and the uncertain future.


In all countries with low incomes in the world, the rate of unemployment is not a good indicator of the weaknesses in the labor marketplace the rate was only 4.3 percent in 2013. Instead, the majority of the workforce is employed in informal jobs and is afflicted by underemployment. The gender gap persists despite the increase in the proportion of women working. In the end, strong development in the economy of Bangladesh is linked with mutually constructive and ongoing service challenges, including the want for diversification, deprived work circumstances, lower efficiency, and high levels of casualness (Altman, 2018). This essay examines the character of the structural changes in Bangladesh and outlines the main challenges that will be faced in the potential expansion acceleration and the construction of jobs.


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