What is Factor, Efficiency or Innovation driven economy ?
How can be described:
- Factor driven economy
- Efficiency driven economy
- Innovation driven economy
What are the differences between them ?
Those are the main 3 stages of economic development, also known as stages of economic growth.
Factor driven economy - is the first stage of development, in which competitive advantage is based on unskilled labor or natural resources. Economies are producing mostly basic products.
Efficiency driven economy - is the second stage of development, in which efficiency in producing standard products becomes the main source of competitive advantage. The production process is more efficient and quality of products is increased. Economies concentrate on manufacturing.
Innovation driven economy - is the third stage of development, with ability to produce new innovative products through sophisticated processes. Using of the most advanced methods becomes the main source of competitive advantage. Companies are more knowledge intensive and invest strongly in advanced skills and technology.
Thank you. Can you please give examples of countries for each stage ?
For the purpose of country classification, there are also 2 middle stages used for transforming economies. So there are 3 main stages and 2 middle stages of economic development. The examples of countries for each development stage are:
Factor driven economy - Bangladesh, Pakistan, Zimbabwe
Transition stage between factor driven and efficiency driven economy - Azerbaijan, Honduras, Mongolia
Efficiency driven economy - Brazil, Egypt, Serbia
Transition stage between efficiency driven and innovation driven economy - Croatia, Slovak Republic, Malaysia
Innovation driven economy - Germany, United Kingdom, United States