From “Innovation and Entrepreneurship” by Peter F. Drucker
Entrepreneurs innovate. Innovation is the specific instrument of entrepreneurship. It is the act that endows resources with a new capacity to create wealth. Innovation, indeed, creates a resource. There is no such thing as a “resource” until man finds a use for something in nature and thus endows it with economic value. Until then, every plant is a week and every mineral just another rock. Not much more than a century ago, neither mineral oil seeping out of the ground nor bauxite, the ore of aluminum, were resources. They were nuisances, both render the soil infertile. The penicillin mold was a pest, not a resource. Bacteriologists went to great lengths to protect theri bacterial cultures against contamination by it. THen in the 1920s, a London doctor, Alexander Fleming, realized that this “pest” was exactly the bacterial killer bacteriologists had been looking for – and the penicillin mold became a valuable resource.
The same holds just as true in the social and economic spheres. There is no greater resource in an economy than “purchasing power”. But purchasing power is the creation of the innovating entrepreneur.
The American farmer had virtually no purchasing power in the early nineteenth century; he therefore could not buy farm machinery. There were dozens of harvesting machines on the market, but however much he might have wanted them, the farmer could not pay for them. Then one of the many harvesting-machine inventors, Cyrus McCormick, invented installment buying. This enabled the farmer to pay for a harvesting machine out of his future earnings rather than out of past savings – and suddenly the farmer had “purchasing power” to buy farm equipment.
Equally, whatever changes the wealth-producing potential of already existing resources constitutes innovation.