The article reveals the economic essence of the innovation process, which is considered as a key factor of sustainable development and increasing the competitiveness of the economy. It is shown that innovation is not just a scientific discovery or technical invention, but the final result of their practical implementation and commercialization, aimed at meeting social needs and improving the efficiency of resource use. The paper analyzes various interpretations of the concept of "innovation" presented in the works of J. Schumpeter, H. Barnett, B. Santo, B. Twiss, P. Drucker, as well as Kazakhstani scholars. Special attention is paid to the approaches to innovation classification: technological and non-technological, basic, improving and pseudo-innovations, product and process innovations. It is clarified that the innovation process is cyclical, includes a sequence of stages from idea to moral obsolescence, and represents a complex interaction of science, entrepreneurship, capital, and management. The conclusion is made that the innovation process acts as a mechanism for transforming the intellectual potential of society into an economic result, ensuring productivity growth, the formation of new markets, and improvement in the quality of life.