You are the production manager at a mid$-$sized manufacturing company that aims to boost productivity growth by enhancing both innovation and efficiency. To remain competitive, you$$re evaluating new technology investments and process improvements that minimize waste and align production with consumer demand. Understanding how these factors interact is crucial for optimizing your operations.

Which of the following best explains how innovation and efficiency contribute to productivity growth in this business setting?

Innovation solely focuses on creating entirely new products without considering production processes, while efficiency only involves reducing labor costs, which does not necessarily improve the overall output.

Innovation through advances in technology and efficiency through improved business processes increases the output per unit of input, thereby driving productivity growth.

Innovation typically requires higher input costs and leads to increased complexity, while efficiency compromises product quality, ultimately hindering productivity growth.

Innovation and efficiency are only relevant for large$-$scale enterprises; small businesses cannot effectively use these strategies to boost productivity growth.