Innovative Business State Regulation Policy and Its Supporting Institutions in Georgia

<p style="text-align: right;"><a href="https://search.crossref.org/search/works?q=10.52340%2Feab.2024.16.04.02&from_ui=yes">doi.org/10.52340/eab.2024.16.04.02</a> <p style="text-align: justify;">Innovative business is a multi-stage and long-term process that starts with an idea, the next stages are research and development (engineering and construction work, testing, creation of prototypes, development of intellectual property strategy, first review of markets, selection of technology commercialization strategy) - commercialization - test release - full-scale Production - distribution - marketing. Each stage of this long and risky process is characterized by the peculiarities of the regulation of relations between the participants and the existence of risks for this stage.<br />For Georgia, the development of innovative business is an opportunity to turn from an importing country into an exporting country of science-intensive products. The introduction of innovations in manufacturing business will not only increase the quality of manufactured products and reduce costs, but also create fundamentally new types of competitive products and services, new markets will emerge, the competitiveness of business entities will increase, and the standard of living of the population will rise, thereby Georgia will take a worthy place among the countries of the European Community. <p style="text-align: justify;"><strong>Keywords:</strong> Innovative business, state innovative policy, regulatory instruments, supporting institutions, regulatory legal framework and normative acts.<br /><strong>JEL Codes:</strong> M21, O31, Q55 <p style="text-align: justify;"><br /><strong>Introduction</strong> <p style="text-align: justify;">Innovative process in business is the process of transforming scientific knowledge into innovations. It is generally understood as an activity that ensures the constant search for new opportunities, the search for various resource sources to solve the tasks, attraction and involvement in the re-production process, the production of scientific, competitive products through new approaches and technologies.<br />Innovative policy of the state is a constituent part of the socio-economic policy, which determines the goals, directions and methods of activities of state authorities in the field of innovation. The main task of innovative policy at the modern stage is to create such a system that will be able to use national intellectual policy and the achievements of modern techniques and technologies to produce competitive products.<br />Intellectual resource is one of the priority tools of business. Thus, the process of using modern scientific and technical knowledge in business is expressed by the concept of innovation.<br />The development of innovative business is largely determined by the market mechanism due to intense domestic and international competition, but regulation of this process by the state is objectively necessary, since it can ensure:<br />• Avoiding market crises;<br />• Planned driving of innovative processes (compliance of the country`s economic development strategy with the goals of innovative development and vice versa);<br />• Effective mobilization of resources;<br />• Effective organization of the country`s science and education system;<br />• Effective use of international innovative experience;<br />• Financial, institutional and organizational support, etc. <p style="text-align: justify;"><strong>The Essence of State Regulation of Innovative Business and the Necessity of Its Use in Market Economy Conditions</strong> <p style="text-align: justify;">General Analysis. Innovation is primarily a response to the challenges of the international business environment. Constant changes in legislation, conditions and rules of doing business, increasing competition, emergence of new knowledge in the field of business organization and management, thorough training of workers and managers, their continuous replacement by motivated, task-oriented and talented new generations, emergence of new markets, engineering, business communication and information Development of technology means, scientific-technical progress, etc. It requires enterprises to have highly adaptive capabilities. The constant adaptation of the enterprise to the changing conditions of the international business environment is carried out through managerial innovation, which determines the superiority of the innovative component in the business management system.<br />Only with the fruitful interaction of science, entrepreneurship, society, state and municipal bodies, it will be possible to ensure the rapid pace of economic development of the country and the formation of many innovative businesses.<br />Formation and development of innovative entrepreneurship is impossible without joint efforts of business, science and the state. The processes promoting the formation of innovative business should be implemented through the state regulation mechanism, the structure and content of which depends on the level of innovative development of the country, the strategy and tactics of the country`s economic development.<br />The 21st century is an era based on the knowledge economy. In the modern world, a new system of values is being created, which fundamentally changes the main factor of the development of the economy and business sector and establishes a new type of economic policy. . In this process, the knowledge sector plays a crucial role. Knowledge production is the source of economic growth. This means that along with new forms of business organization, the dominant economic growth becomes a system of scientific knowledge - a system of new processes, products and services.<br />According to world experience and international standards, innovative business is the result of intellectual activity, which is reflected in new, improved products and services, or in new and improved technologies used in practical activities. Therefore, the necessary features of innovation are scientific-technical novelty, industrial applicability and commercialization. Innovations turn into a strategic factor of growth, affect the structure of public production, change the face of the economic organization of society, stabilize the social situation in the country.<br />The future of Georgia`s development belongs to innovative business. It is the national innovative system that is the basis of development in any field, a possible mechanism for meeting any demand of the society. Innovation is the basis of the adoption of innovations in the economy and business sector, which leads to the growth of the economy. Business processes should be driven by innovation. Development through innovation means development and implementation of innovation policy at all (country, regional) levels of management. This approach should be widely shared and should not cause controversy in Georgia.<br />Development of innovative business for Georgia is an opportunity to become an exporter of scientific products from an importing country. The introduction of innovations in the field of production will not only increase the quality of manufactured products and reduce costs, but also fundamentally new types of competitive products and services will be created, new key markets will emerge, the competitiveness of business entities will increase, the standard of living of the population will rise, thus Georgia will occupy a worthy place among the countries of the European Community.<br />In the process of developing innovative policy, it is important to determine in detail the role of state institutions in the formation of the country`s innovative economy system and to analyze state institutions, based on which we will determine the needs and problems of state institutions in the formation of innovative economy. As mentioned above, research institutes, universities, investors, innovative ecosystem supporting institutions, business incubators, which give entrepreneurs with innovative ideas the opportunity to develop their own business idea under favorable conditions, are involved in the formation of innovation policy. The amount of funding to be provided for research and development is determined by the Parliament of Georgia during the review of the state budget.<br />Thus, the ministries have an important role and responsibility in the formation of the innovative policy: the Ministry of Education and Science of Georgia is responsible for the perfection of one of the directions of the formation of the innovative economy, the knowledge-based economy. Their duty is to regulate the research and development system. The "Shota Rustaveli National Scientific Foundation" created on the basis of the Ministry promotes the development of the system of science, technology and innovation in the country. Ministry of Economy and Sustainable Development of Georgia - works on the country`s economic and social development strategy. He is responsible for building an innovative economy in the country. The goal of the agency under the Ministry of Economy and Sustainable Development - "Georgian Innovation and Technology Agency" is the development of the innovative ecosystem. Also, the National Center of Intellectual Property of Georgia - "Sakpatent", which determines the policy of intellectual property, was created on the basis of the said Ministry. The Ministry of Finance of Georgia, while defining the budgetary and tax policy, considers as much as possible tax benefits and state subsidies in order to promote the introduction of innovations in production. The function of the Ministry of Energy in the processes of forming an innovative economy is manifested in the process of creating non-traditional energy resources, in particular, renewable energy resources. The function of the Ministry of Environmental Protection and Agriculture of Georgia is to establish a sustainable economy and society.<br />It aims to manage and conserve natural resources. It is especially important to connect technological innovation with sustainable development, where production processes are carried out in such a way as to significantly reduce waste, environmental pollution and so-called Development of "green business". Thus, we can say that the formation of the innovative economy is carried out by a combination of various state instruments, which includes both state regulation and the role of institutions and measures to promote the development of innovation in it, which partially involves financial assistance and support.<br />At the modern stage, innovations in the economy and business sector are a powerful mechanism and determining factor for the introduction of unique technologies, progressive development, and raising the country`s competitiveness.<br />The essence of the state regulation of the formation of innovative entrepreneurship is that the state, based on market principles, should promote the acceleration of the processes of innovative development of the economy. Its peculiarity is expressed in the fact that the main focus of regulation is shifted to the qualitative improvement of the economy. Its main goal is not only to facilitate the action of market forces to accelerate the process of innovative development, but also to avoid the negative consequences of economic activity on nature. It has been a long time since the disturbing contours of impending catastrophes have been drawn around the world.<br />Therefore, the state should promote such innovative processes that lead to sustainable economic development. At the same time, the innovative development of the country`s economy and sustainable economic development should be considered in a single perspective. The existence of a flexible mechanism of state regulation of the formation of innovative entrepreneurship is a necessary condition for the formation of innovative business in developing countries.<br />It is important for Georgia and similar developing countries to implement and support economic activities focused on knowledge and introduction of new technologies, along with traditional production factors. The mentioned issue, on the other hand, refers to the innovative business development strategy developed by both the central and regional authorities and their implementation. On the part of some scientists, scientific-technological development is often defined as the merit of private companies, and in this process, the state, as a regulatory and controlling body, is considered an obstacle. Nevertheless, as a counterbalance to the mentioned opinion, it is possible to cite such projects financed by the state, which created the basis for the development and progress of new technologies.<br />Under the conditions of such financing, a number of important technological bases have been created, the results of which are spread in important sectors of the economy. In many cases, the state appears to be the only, unconditional party that is ready to make a significant capital investment in a high-risk investment project, which, in turn, involves the creation of innovative technology, which traditional private companies and commercial banks are unable to do. The involvement of the latter is usually revealed after the state has completed the main works. This approach has been tested in both developed and developing countries (USA, Scandinavian countries, Japan, Israel, etc.).<br />Modern experience shows that the creation, dissemination and adoption of innovative technologies initially reduces economic growth rates and productivity levels (due to integration and restructuring problems), but in the long term, due to the improvement of productivity levels and, ultimately, the acceleration of economic growth rates, technological innovation is considered as the main driver of economic growth. driving force (Mokyr, 1990). Some scholars critically assess the relationship between innovation and national economic growth (Edgerton, 2007). Many factors can be considered as the origin of innovative ideas, such as fundamental and applied research, innovation diffusion, process improvement and others. It is worth that the of national innovation to knowledge This is revealed by the fact that the technological development process in the international companies was financed with the financial by the etc. />Formation of innovative business and development of is a long-term process that requires the creation and introduction of new technologies, improvement of the education development of science and information which is impossible without the development of innovative and of innovative business is important for both developing and developed The formation of an innovative economy in developing countries is by the introduction of innovation, as as by the attraction of which is by the of />The role of the state in the process of formation of innovative business can be in />• regulatory and legal />• through economic policy />• of private companies />The first component of the formation of innovative business is the regulatory instruments, which refers to the state and institutional regulation for the development of innovative entrepreneurship in the country, which is defined as the main It is also worth that institutional and regulatory are used to regulate market the formation of innovative based on the legal />The improvement of the framework to the formation of innovative in Georgia in the of the and especially since the of the formation of innovative a priority of state This is by the formation of the legal of the construction of innovative entrepreneurship and the development of the national innovation which ensures the implementation of the innovation where the market plays the main and the state becomes the of innovation <p style="text-align: of State Regulation of Innovative Business and Its in <p style="text-align: of the mechanism of state regulation of the formation of innovative business is to promote the formation of innovative business in the country, to the that the market mechanism has in this As structure and content depends on the level of innovative development of the country, economic strategy and tactics of the country.<br />In the conditions of the market economy, it is and for enterprises to take a significant place in the the of has the of the world economy, and the and services that a are for the society. Therefore, companies to establish their in the have to with innovative development has become an part of the main activities of it ensures the creation of new and improved products and services on the the of the and of companies and />The creation of and business not ensure the implementation of innovative in the process of economic development. 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