The contribution of enterprises to innovation is crucial, and a dynamic business sector is a key source and channel of technological and non-technological innovation. New companies frequently exploit technological or commercial opportunities which have been neglected by more established companies and bring them to market.

Private funding, whether in the form of debt or equity, plays a key role in fuelling innovation. However, significant amount of funding has dried up owing to the recent economic crisis, particularly for seed and start-up companies.

While entry and growth of new firms is important, so is their adaptability to changes in the economy and their ability to exit when necessary. New enterprises drive a large number of obsolete firms out of the market and often do not survive very long themselves. A policy environment that fosters the start-up and growth of new firms is essential for innovation to flourish.

Entrepreneurship is not about firm size. It concerns a process that results in growth, creativity and innovation. Young dynamic firms fuel innovation by developing new or improving existing goods, services or processes.

Fostering innovation in the public sector at all levels of government enhances the delivery of public services, improves efficiency, coverage and equity, and creates positive externalities in the rest of the economy.