doi.org/10.52340/eab.2024.16.04.02

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.
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.

Keywords: Innovative business, state innovative policy, regulatory instruments, supporting institutions, regulatory legal framework and normative acts.
JEL Codes: M21, O31, Q55

Introduction

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.
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.
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.
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:
• Avoiding market crises;
• Planned driving of innovative processes (compliance of the country's economic development strategy with the goals of innovative development and vice versa);
• Effective mobilization of resources;
• Effective organization of the country's science and education system;
• Effective use of international innovative experience;
• Financial, institutional and organizational support, etc.

The Essence of State Regulation of Innovative Business and the Necessity of Its Use in Market Economy Conditions

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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.).
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 noting that the study of national innovation systems pays special attention to knowledge flows. This is revealed by the fact that the technological development process in the following international companies was financed with the financial resources allocated by the state: IPHON, TESLA, MOTOROLA, etc. [Source: https://about.crunchbase.com/blog/top-govtech-companies-2019/ (20.09.2020)].
Formation of innovative business and development of policies is a long-term process that requires the creation and introduction of new technologies, improvement of the education system, development of science and information systems, which is impossible without the development of innovative policies and strategies. Formation of innovative business is important for both developing and developed countries. The formation of an innovative economy in developing countries is partly ensured by the introduction of innovation, as well as by the attraction of direct foreign investments, which is accompanied by the import of technology. (Bakhtadze, S. Danelia, 2020).
The role of the state in the process of formation of innovative business can be identified in different ways, namely:
• Through regulatory instruments (institutions and legal framework);
• through economic policy tools;
• Through instruments of private companies (commercialization).
The first component of the formation of innovative business is the regulatory instruments, which refers to the state legislative and institutional regulation for the development of innovative entrepreneurship in the country, which is defined as the main indicator. It is also worth noting that institutional and regulatory instruments are used to regulate market relations, including the formation of innovative businesses, based on the relevant legal framework.
The improvement of the legislative framework related to the formation of innovative businesses in Georgia began in the 90s of the 20th century, and especially since 2014, the issue of the formation of innovative businesses became a priority area of state interests. This is evidenced by the formation of the legal base of innovations, the construction of innovative entrepreneurship and the development of the national innovation system, which ensures the smooth implementation of the entire innovation cycle (science-technologies-production), where the market plays the main role, and the state becomes the regulator of innovation processes.

Mechanism of State Regulation of Innovative Business and Its Supporting Institutions in Georgia

The purpose of the mechanism of state regulation of the formation of innovative business is to promote the formation of innovative business in the country, to fill the shortcomings that the market mechanism has in this direction. As already mentioned, its structure and content depends on the level of innovative development of the country, economic strategy and tactics of the country.
In the conditions of the market economy, it is becoming more and more difficult for enterprises to take a significant place in the market, because the growing influence of globalization has completely changed the picture of the world economy, and therefore the goods and services that were present even a few years ago are no longer valuable for the society. Therefore, if companies want to establish their name in the market, they have to keep up with these changes, therefore, today, innovative development has become an integral part of the main activities of enterprises, because it ensures the creation of completely new and improved products and services on the market, increases the efficiency of the company, and most importantly, Increases profitability of companies and enterprises.
The creation of venture funds, technoparks and business incubators does not automatically ensure the implementation of innovative policies in the process of economic development. Therefore, moving Georgia to the innovative path of development requires great efforts in this direction in the country and effective use of supporting institutions.
Several organizations supporting small and medium entrepreneurship operate in Georgia, including: The Chamber of Commerce and Industry of Georgia, which is established as an independent state agency, its main functions are to provide informational, consulting-recommendation services to representatives of the business sector. Promotion of improvement of business planning and innovative entrepreneurship skills, activation of export stimulation, promotion of internationalization of firms, enterprises, connection of communication and coordination lines with trade partners of different countries of the world, investors. Membership of the Chamber of Commerce and Industry is voluntary, 90% of which are small and medium-sized entrepreneurs. The membership fee ranges from zero GEL to 10,000 GEL and depends on the services rendered.
The Chamber of Commerce and Industry in Georgia unites six regional chambers, more than a thousand companies, commercial banks and other institutions. The Chamber is a subject of public law, operating on the basis of the Law of Georgia "About Chamber of Commerce and Industry". It is an independent non-governmental organization. The president and vice-president of the chamber are elected by the general assembly of businessmen.
The functions of the Chamber of Commerce and Industry of Georgia are:
• Providing informational and consulting services for business entities, organizing training to raise their qualifications and professional education;
• Diversification and key promotion of export of local goods and services;
• Preparation of documents related to the patenting of inventions, utility models, industrial designs, trademarks, trade names and service names;
• implementation of measures related to investment activity in Georgia, promotion of measures for the protection of antimonopoly legislation;
• Helping entrepreneurs in the preparation of business plans, fulfilling the specified requirements of the normative acts of Georgia and other tasks;
• Coordination of activities of regional chambers of commerce and industry operating in the territory of Georgia.
In 2014, the Government of Georgia started the state program "Produce in Georgia", and since 2015, within the framework of "Produce in Georgia", the direction of promoting micro, small and medium entrepreneurship, the main goal of which is to promote the growth of economic activity in the regions of Georgia, and includes two components: financial and technical assistance. As part of the technical assistance, the beneficiaries receive individual consulting-recommendation services and undergo business trainings. In order to increase the efficiency of the program, as well as to identify possible gaps, the evaluation and monitoring of the program is provided. as well as cooperation with the European Union within the framework of the Eastern Partnership initiative.
Georgia actively participates in the Small and Medium Business Block of the Eastern Partnership and also cooperates with the Organization for Economic Cooperation and Development (OECD), the European Education Block (EEF). With the European Bank for Reconstruction and Development (EBRD) and other international organizations, it is necessary to adapt the best international and European practices of SME policy. Within the framework of the Eastern Partnership initiative, projects focused on small and medium entrepreneurship are implemented, financial and technical assistance was provided to more than 1000 small and medium entrepreneurs. In 2015, he participated in the EU aid project, which provides for the support of small and medium-sized entrepreneurs (budget - 44.5 million euros).
The mission of the Agency of Innovations and Technologies of Georgia is to form the necessary ecosystem for the development of innovations and technologies in Georgia, to promote the commercialization of knowledge and innovation, to stimulate the use of innovations and technologies in all sectors of the economy, to create a business environment necessary for the growth of exports of innovations and high-tech products.
In order to maximize the global competitiveness of Georgia's economy and the maximum use of Georgia's scientific potential, three main technological directions of the country have been defined, which will enable local and international businesses to create global-level technological solutions in Georgia:
Artificial intelligence - a scientific group will be created in Georgia, which will work on the implementation of artificial intelligence in education, healthcare, agriculture and other directions.
Phages - The demand for phages is especially increasing worldwide due to antibiotic resistance in many infections and diseases. Georgia has almost a century of phage research experience; therefore our country can export important technological products in the direction of phages on an international scale. Agrotechnologies - a large part of the population of Georgia is employed in the sector that is why it is important to create new scientific and technological products, which will further increase the productivity and competitiveness of Georgian farmers.
A full-scale incubation project, which includes a 12-month startup incubation program in 3 stages: Founder Market Fit - in the first stage of the program, 40 startups will be selected and the founders will undergo active coaching and mentoring for two months. The MVP stage includes a four-month mentorship in the process of creating minimal cost products, market testing and building relationships with clients, as well as a grant of 50,000 GEL to cover the costs of creating an MVP. Up to 20 startups will move to this stage. Market Entry - stage includes a six-month mentoring so-called to achieve Traction and a grant of 150,000 GEL.
The incubation program will be implemented by 4 international and/or local incubators selected by GITA. Within the framework of the program, a total of 160 startups will be included in incubation every year.
More than 200 innovative startups with global potential were funded within the co-financing grants program of the Georgian Innovation and Technology Agency. The amount of grant funding amounted to 38 million GEL, and as a result, the funded startups gained half a billion GEL of private financial benefits and created up to 3,000 new jobs.
On the initiative of the Innovation and Technology Agency of Georgia, the powerful global venture capital platform 500 Global, included in the top three accelerators of the world, entered the country, which implements the international level acceleration program. Along with Georgian startups, international startups also participate in it, which emphasizes the role of Georgia as a regional innovation hub. Along with this, the first venture fund in Georgia was created with a capital of 20 million dollars.
Across Georgia, 9 technoparks have been established, which provide, on the principle of one window, to help the citizens of Georgia with innovative ideas in their commercialization. In the framework of the grant program "up to 25,000 GEL innovation grants for regions", a total of 80 projects were financed.
As a result of the establishment of tax incentives for IT companies by the Government of Georgia, 120 international IT companies entered Georgia, to which, according to the data of 12 months of 2023, they gave a billion GEL in the form of salaries, and more than 10,000 jobs were created." -
GITA implements various programs aimed at financing startups and business development, as well as offers students and schoolchildren various types of educational and cognitive projects.
Innovation Agency offers various free services to interested persons. Together with the Technopark, the agency includes a common workspace, as well as a universal laboratory of industrial innovations FABLAB, a conference hall, meeting rooms and a recreation area. In addition, the innovation agency offers startups a shared workspace for free, the so-called of co-working. A shared workspace is a unique place for motivated, active and innovative people. It is a space where innovative people with common interest and value come together to make new connections and business contacts. The door to the shared workspace is open to both entrepreneurs and startups, as well as private individuals. Technopark space offers complete office infrastructure, high-speed Internet, modern, comfortable environment and customized services.
Fablab provides access to technological, educational and professional resources: Fablab is a unique space for any citizen who has an idea and wants to implement it or turn it into a startup business. Fablab allows everyone to have access to modern technology and equipment. It is tailored to any user and helps generate ideas.
Technoparks combine business incubators, laboratories and technoparks with recreational and educational spaces. In 2016, the first technological park was opened in Georgia with the promotion of innovation technologies, where there is a technopark fablab7. Its goal is to offer the world a different, unique model of building a knowledge-based economy. The development of fablabs is important both for the formation of new start-up businesses and for the promotion of small personal production. This means that in order to make a product with the desired individual design or functions, it will no longer be necessary to interact with large factories and productions, and all this will be done locally, on the basis of fablabs. 14 industrial innovation laboratories operate on the basis of vocational schools in Georgia, business incubators for innovations have also been created. The development of scientific research in Georgia is served by the Shota Rustaveli National Science Foundation of Georgia, established in 2010, whose goal is to increase the scientific research potential of scientific research institutions and promote the integration of Georgian researchers in the international scientific space, targeting the financing of state grant competitions, national programs and projects. The Foundation issues grants for conducting small-scale research in all fields of science based on competition.
Fablab 7 is the same fabrication laboratory equipped with high-tech equipment. In the fablab laboratory, it is possible for the user to carry out digital fabrication.
Issues of intellectual property protection in Georgia are provided by the National Center of Intellectual Property of Georgia - "Sakpatent", which determines the policy of intellectual property according to the legislation of Georgia. Intellectual property policy is implemented on this legal basis. In this regard, in 2022-2023, it is worth noting the exceptionally high activity, which is confirmed by the increased number of applications for inventions.

 
Conclusion and Recommendations

In any country of the world, an important factor of economic development is not only natural resources, minerals, territorial area, demographic number, but also priority is to consider innovative approaches, which is one of the main prerequisites for the country's economic competitiveness. The formation of innovative entrepreneurship requires the selection of effective tools in the direction of decentralization of education, trade, investments and finances, which creates a fertile ground for the introduction of innovations in the mentioned areas, which can be achieved by optimal coordination of various combinations of state regulation tools.
On the basis of empirical studies and comparative analysis, it is possible to formulate our opinions as a conclusion: in order to accelerate economic development in Georgia and other developing countries, it is necessary to build innovative businesses. In the mentioned process, great importance is given to the policy of state regulation, for which there should be a mechanism of state regulation of innovative business development in the country. Its purpose is to promote the formation of innovative entrepreneurship, to fill the shortcomings that the market mechanism has in this direction.
The process of innovative business formation in Georgia can be said to be at an average level, but the innovative scale of the development of the modern world requires the country's adaptation and compliance. Thus, there is a need for fundamental development and progress of the country's innovative policy.
During the development of the mechanism of state regulation, first of all, it should be determined what elements it consists of. The formation and management of the mechanism of state regulation of the formation of innovative entrepreneurship is carried out by state regulatory bodies, and the main elements of this mechanism are: legislative and normative base of regulation; regulation tools; system of regulation indicators; infrastructure of innovative system; System of measures for formation of innovative entrepreneurship. All these elements are characterized in the work separately, while the shortcomings in the field of innovative development in Georgia are identified and the general directions of innovative business are set.
In conclusion, the general directions of the mechanism of state regulation of innovative business in Georgia can be formulated as follows:
• Development of an innovative policy and modern strategy by the state;
• Development and progress of national innovative business;
• Development of innovative infrastructure and effective use of institutions;
• Improvement of the scientific research service system;
• Acceleration of the development of innovative entrepreneurship in small and medium-sized businesses;
• Development of innovative entrepreneurship at the regional level and support for financing;
• Development of competitive business;
• Innovative development of agriculture;
• Strengthening of relations between science, business and the state;
• Legal protection and regulation of intellectual property

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Internet resources:
• Statistical Service of Georgia.
• www.mof.ge.
• www.nbg.gov.ge
• www.oecd.org
• www.gita.gov.ge.
• www.economy.ge
• www.worldbank.org
• www.ec.europa.eu/eurostat
• https://www.sakpatenti.gov.ge/ka