The term “free enterprise” or “free market” refers to an economy in which the market, defines the prices of the products and services. Here the government has low power. Businesses and services are not changing as per government regulations. Apart from that, a free enterprise may refer to an ideological or legal system in which the private sector primarily governs activities.

Technological Innovation

Tech innovation is a new or improved product or process with different features than previous versions. The product or process is considered innovative if it provides specified benefits to the enterprise; these benefits do not have to be novel in the eyes of other companies or the market.

Product Innovations

Products produce by using new techs and methods. An innovative product can facilitate a range of user needs more than the usual products.

Process Innovations

A process that is highly linked to new techs and methods. An innovative process consumes a low amount of factors of production. This saves the cost of revenue for the firm. An innovative process helps to build profits and gain market share.

Impact of Free Enterprise System on Technological Innovation

Technology improves competition among parties in a free market system. Thanks to high-tech methods organizations can get the best use of production factors. The efficiency is higher than before. Hence in a free market, there is a general preference for high-tech methods. The impact of free enterprise systems on tech innovation can be split into four pillars.


In a free market, the private sector’s dominance is high. Price is one of the most significant production aspects of a firm. In the free-market profits comes as an incentive for the effort. No place for abnormal prices. There is good competition among the commodities in the market for prices. 

This quality helps technology to grow. Due to the highly competitive prices, the materials for experiments will be at a competitive level. Hence there is room for innovations. This is a great contribution of the free market to tech innovations.

Independent Thinking And New Business Ventures

Free enterprise systems open doors to independent thinking and new business ventures. Each new business venture is an application of technology related to the industry. However, the economy should limit the independent operations of the new ventures to maintain the risk of unwanted innovations such as producing advanced weapons, drugs, etc.

High Market Competition

A good level of market competition is the main quality of a free enterprise system. The nature of the policy frame of the market increases the competition to the ultimate level. High market competition is the key to make innovation.

To secure market share, firms have to seek high-tech options to adjust to the effects of inflation.

Influence On Consumer Sovereignty

In a free enterprise system, the power of the buyer is high. Buyers have information so the seller has to seek innovative solutions to grab the customers.

Also read: What technological innovations have made globalization possible?


A free enterprise system allocates power to the market entities than the central government. It helps to keep a good competition. A free enterprise system prefers tech-based innovations. Hence the contribution is there. It can be split into four pillars. Namely the price, independent thinking, high market competition, and Influence on consumer sovereignty.


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