The Schumpeter creative destruction hypothesis: a spatial assessment on Portuguese regions

Abstract

Shumpeter characterised the innovative role of the entrepreneur on economic growth (Schumpeter, 1942). By inventing new products, new processes or techniques, the entrepreneur searches for monopoly rents and forces the social and economic structure to evolve. The routines, characterised by accommodative behaviour, which may endure for long periods are suddenly broken, in a sequence of stagnation and evolutionary periods (Schumpeter, 1947). Therefore, according to the Schumpeter theory, innovation is at the core of economic growth, and goes further as it causes social and economic structural changes. The present article leads on with an empirical assessment about the Schumpeter creative destruction hypothesis at the Portuguese Regional level, using a spatial econometric framework, based on Elhorst (2003) and Bhattacharjee et al. (2012). We estimate a model with spatial fixed effect, exploring the relation between R&D intensity at the firm level, productivity and firm demography dynamics, using a panel data for the 28 Portuguese continental NUTsIII regions between 2006 and 2009. The results obtained confirm the association between productivity and firm demographic dynamics – i.e., regions with higher level of productivity present also higher rates of birth and mortality among firms. We have not found, as it would be predictable according to the Schumpeter hypothesis, statistical evidence of association between productivity and R&D intensity at the firm level. This result indicates that Portuguese firms behaviour is more of imitation rather than innovation.