Importance of Creativity and Innovation in Human Capital Development

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CREATIVITY AND INNOVATION
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Contents
Executive Summary...................................................................................................................2
Introduction................................................................................................................................2
Discussion..................................................................................................................................2
Conclusion..................................................................................................................................6
References..................................................................................................................................8
Executive Summary
Creativity and innovation are vital aspects of human capital. From innovation and
creativity rises technological development which is essential in the growth and development
of an economy. In some cases, the GDP of a country may grow without significant
investments in the development of human capital. However, creativity and innovation ensures
there are positive changes in human capital to make any growth sustainable and any
economic contractions less hurtful to the economy.
Introduction
There are four primary factors of production namely land, labor, capital and
entrepreneurship. The factors of entrepreneurship and labor are human-oriented. As such,
human effort is needed to give thee inputs power. The role of technology in economic
development is attributed to the human input into the production of goods and services.
Technology requires innovation which is a product of human creativity. Every economy can
grow fast if its innovative capacity is put to the maximum use. Creativity produces new ideas
of combining various inputs to come up with products that add value to the stakeholders
involved. While creativity deals with ideas, innovation often refers to the tangible results of

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creativity. Creativity is valued as it fuels progress thereby creating net positive welfare for
society.
Discussion
It is essential for an economy to invest in creativity and innovation. There are many
theories of economic growth which emphasize the different components of an economy as
the key pillar to focus on to fuel growth. Endogenous growth theories emphasize on the role
of human capital and technological innovation in growth (Lewis, 2013). Human capital refers
to the measure of skills, education, capacity and other attributes that influence the productive
capacity of individuals. Human capital can be increased by placing focus on specialization
and division of labor, education, creating a culture of creativity, and increasing
competitiveness (Lewis, 2013). Creativity is a vital component of human capital as it veers
away from the conventional accumulation of learned information. Creativity enables
individuals to create new knowledge and new ways of approaching various issues. As such,
creativity leads to the accumulation of the body of knowledge available for other people
(Somech and Drach-Zahavy, 2013). Endogenous growth models encourage the investment in
creativity to boost technological innovation. By boosting technological innovation, both
human and capital productivity will be increased. By increasing labor productivity, an
economy will see increasing returns (Somech and Drach-Zahavy, 2013).
In an economy that has high rates of creativity and innovation, creative destruction is
common. This takes place when some production units innovate and develop new more
efficient ways of utilizing inputs while other units fail to keep up with the innovation. As
such, the less efficient units are phased out as they cease to be competitive in the marketplace
(Weber, 2016). In some cases, such competition may be between different business units or
economic sectors while in others it may be in the same business. For instance, a business may
develop a new product that renders another product that it had on the market obsolete. The