Final answer:
Technological innovation fuels economic growth by increasing productivity, creating new business opportunities, and allowing for quick and cost-effective adoption of new production methods. Strong institutions in technology-advanced countries further aid growth and make subsequent innovations easier.
Step-by-step explanation:
Technological innovation is a key driver of economic growth because it enhances productivity and leads to the creation of new industries and business opportunities. When technology progresses, it enables businesses and workers to produce more with the same amount of labor and capital, which is known as increasing productivity. One aspect of economic growth is the growth in human capital and physical capital, but these elements often account for only a portion of growth. Another significant factor is that countries with technology growth have robust institutions that train workers and build advanced machinery, spreading the benefits across the economy. Consequently, these institutions also lay the groundwork for further technological developments. The adoption of new technologies tends to be quick and cost-effective, further fueling economic development and productivity gains. The impact of technology is not only quantitative; it changes how we interact with the world by improving communication, data processing, and many other aspects of daily life. Despite these advancements, there are challenges, such as ensuring private sector investment in new technologies and addressing the market failures that may arise in areas like public goods provision and managing externalities.