TECHNOLOGICAL PROGRESS AND INNOVATION MANAGEMENT IN ADAM SMITH’S THEORY OF ECONOMIC GROWTH

The purpose of the present article is twofold: firstly, to analyze the main components of the economic growth process in the theory of A. Smith; secondly, to develop a mathematical model of growth based on the interpretation of his arguments about technological progress and the division of labour. In addition, the article identifies opportunities for the practical application of A. Smith’s ideas in modern economic life and management. The paper analyses the main components of A. Smith’s model of economic growth, namely capital accumulation, technological progress, and the division of labour. The analysis demonstrates that technological progress functions as a trigger capable of lifting the economic system out of a trap of a low-level stable equilibrium and thus initiating the process of economic growth. The study determines the impact of technological progress on the process of economic growth, contingent on the nature and origin of innovations. The paper then presents an economic and mathematical model that reflects the dynamics of economic system development based on different types of innovations. This model is based on the interpretation of A. Smith’s arguments about technical progress and the division of labour. The model demonstrates that the result of long-term technical progress is the possibility for employees to have real incomes that exceed the norm of minimum physiological needs throughout the entire period of economic development. Moreover, it is proved that, given a sufficiently high rate of innovative changes, the level of the subsistence minimum will constantly increase. This is a significant result that is consistent with A. Smith’s primary theme, which is to achieve a high level of consumption across all societies, or ‘universal opulence.” The practical application of Adam Smith’s economic theories in contemporary management has been identified as a fruitful research area. The concept of the ‘invisible hand’ in the context of corporate management can be used to introduce a system of decentralized management, which has the potential to activate the innovative behavior of employees. It has been demonstrated that employees who possess a certain degree of autonomy in decision-making and risk-taking within the organisational structure tend to exhibit heightened levels of creativity and proactively seek innovative technological solutions to address challenges and optimize their work processes. The specialization of labor, achieved through the fragmentation of the overall operational process into individual tasks by managers, is argued to be the driving force behind increasing productivity and economic growth. This is further supported by the assertion that technological progress constitutes the predominant element in the division of labor. Any specialization of individual personnel or their groups at specific stages of the overall operational process represents a managerial innovation.