ABSTRACT
This chapter explains the impact of institutions on economies in a dynamic sense. It focuses on a dynamic economy, one that is able to increase its level of technology over time. The development and integration of new technology are extremely complex. The chapter addresses three key elements. First, a nation must foster human creativity. The second key element to advancing technology is a well-functioning capital market. The third key element necessary for an economy to generate new technology is a competitive environment that forces firms to continually improve their products or risk being forced out of business. Technology progresses from both microinventions and macroinventions. Microinventions are "the small, incremental steps that improve, adapt, and streamline existing techniques already in use, reducing costs, improving form and function, increasing durability, and reducing energy and raw material requirements. Macroinventions, on the other hand, are those inventions in which a radical new idea, without clear precedent, emerges" .
