Growth in any economy comes from (i) growth in inputs of production; (ii) improvements in the efficiency of allocation of inputs across economic activities; and (iii) innovation that creates new products, devises new uses for existing products, and increases the efficiency of input use.
Analysis of sources of economic growth finds that the biggest differences between developed and developing economies are in innovation performances. Innovation is critical for economic growth, but it also becomes increasingly important for addressing major development challenges, such as the ones related to inclusion and sustainability.