Creative Destruction Research Articles

Last Stop on the Cosmic Journey: An Estimated Time of Arrival

History is here imagined as a moral, intellectual, and physical journey whose destination involves: penetration to the furthest reaches of the cosmos, complete understanding of the laws of nature, and a perfect system of ethics with respect to the management of society and nature. It is suggested that the exhaustion of material potential implied by the Second Law of Thermodynamics is counterbalanced by the augmentation of informational potential in a process of ephemeralisation or doing more with less. Evolution is modelled as a process of hyper-exponentially increasing combinatorial complexity interrupted by occasional restarts or episodes of creative destruction. Drawing on these speculations, a calculation is developed leading to the necessarily rough and impressionistic conclusion that humanity will reach its above-defined destination some twenty millennia from now.

ANALYZING THE RELATIONSHIP BETWEEN INDUSTRIAL POLICY AND ENTREPRENEURIAL ECOSYSTEM

This article discusses the importance and articulation of innovation policy from the point of view of the entrepreneurial ecosystem approach. The paper takes the form of a literature review. To this end, the authors describe the analysis of industrial policy based on the entrepreneurial ecosystem approach proposed by Stam (2018). The research finds that innovation policy plays a crucial role in a competitive entrepreneurial environment to achieve creative destruction. The Policy tries to solve the problems that hinder the interaction of the factors that make up the entrepreneurial ecosystem. Different policy tools should be developed to formulate policies for the entrepreneurial ecosystem. Additionally, successful innovation policy tools in one ecosystem could be applied in another ecosystem.

ANALYZING THE RELATIONSHIP BETWEEN INDUSTRIAL POLICY AND ENTREPRENEURIAL ECOSYSTEM

This article discusses the importance and articulation of innovation policy from the point of view of the entrepreneurial ecosystem approach. The paper takes the form of a literature review. To this end, the authors describe the analysis of industrial policy based on the entrepreneurial ecosystem approach proposed by Stam (2018). The research finds that innovation policy plays a crucial role in a competitive entrepreneurial environment to achieve creative destruction. The Policy tries to solve the problems that hinder the interaction of the factors that make up the entrepreneurial ecosystem. Different policy tools should be developed to formulate policies for the entrepreneurial ecosystem. Additionally, successful innovation policy tools in one ecosystem could be applied in another ecosystem.

On the tailor-made water governance mechanism for Taiwan's semiconductor industry

This study explores a new governance mechanism aimed at regional integration and explains how this mechanism can achieve optimal governance of water resources through the division of labour in politics and the economy. This study adopts political economic geography as the research approach. The data used in the analysis were obtained from official documents, interviews and field investigations, and its authenticity was interactively checked via triangulation. The results show that ‘spatial shifts’ were the driving force behind water redistribution. The division of labour between politics and the economy eliminates obstacles to water distribution through the mutual adjustment and division of underground rhizomes; ‘creative destruction’ and ‘destructive creation’ are alternately used to achieve dialectical progress. This study concludes that in this case, the process of regional integration simultaneously generates circular mechanisms in which political power and economic productivity are consolidated.

Ending 1990s Law and Development Ideas, Paradox of Path Dependence In Economic Planning Institutions Under Covid-19: SA’s Response

Abstract This paper argues that the COVID-19 pandemic can and should be understood as a form of creative destruction (Schumpeter’s gale), at a hyper level owing to its biological/medical dimension. Therefore, the critical response to such a hyper force is to rethink how institutions administer Public Policy in South Africa (Path Dependency), most importantly economic development planning institutions and Covid-19 responses, in the form of ‘The Economic Reconstruction and Recovery Plan’. It’s the contention of this paper that the reason why Covid-19 continues to impact the South African government’s economic planning ethos is anchored in its developmental orientation, particularly how constitutional legalism has impaired economic development planning. This could impart be due to the unaddressed influences of the initial waves of Law and Development post-1994. The South African experience with the initial waves of Law and Development were muted owing to the problematic nature of the 1994 transition which sought peace at all costs without necessary addressing substantive economic development reform considerations. Therefore, using the policy experiences of Covid-19 and Lee’s, General Theory of Law and Development, particularly the aspects of Development and State Capacity and Political Will, a revision of the South African Constitution will be called on, principally chapter’s 2 and 6 (Bill of Rights) and (Province).

Patent protection, externalities, and income inequality

AbstractThis paper develops a Schumpeterian growth model with considering consumption and leisure externalities. The main purpose of this study is to investigate the effect of patent protection policy on growth and inequality, as well as the interaction between policy effect and externalities. According to the log form utility function specification, this means that the elasticity of intertemporal substitution is unity. The following are the key findings of this paper. Patent protection policy encourages innovation and increases employment in the R&D industry, which enhances economic growth while increasing income inequality. In regard to externalities, an increase in the degree of consumption (leisure) externalities results in a higher (lower) growth rate and more (smaller) income inequality. When consumption (leisure) externality is greater intensity, the growth effect of patent protection policy becomes stronger (weaker), while its influence on expanding income inequality lessens (enhances). Finally, both the Pareto optimal patent protection policy and the optimal patent policy under the maximization of social welfare positively correlate with consumption externalities, but negatively correlate with leisure externalities.

Creative Destruction and Built Environment Heritage in Makhanda, South Africa

Heritage conservation is recognised as an important component of sustainable development but is often considered a lower priority compared to other development imperatives, and societal issues. The prioritization of economic and urban development threatens urban heritage through a process known as creative destruction. This research uses the concept of creative destruction to explore the interplay between market forces and urban planning and management practices on the heritage conservation of the city of Makhanda in South Africa. Makhanda has a rich and varied cultural heritage landscape, including many individual buildings and streetscapes. A qualitative approach, including semi-structured key informant interviews and secondary sources was employed. The study found that municipal dysfunction and other urban management challenges result in difficultly in enforcing legislation and policy, and thereby threatens heritage conservation. The fates of three buildings within the historic urban fabric of the city are explored in terms of the impacts of neoliberal urbanism occurring within this context. The research contends that for heritage management to be successful, there needs to be a balanced approach through improvements in stakeholder relationships, governance, institutional capacity, knowledge sharing and community involvement in decision-making processes.

Regulation architecture of open innovation under digital transformation: Case study on telemedicine and for-profit-hospital

This research seeks to answer the following research question “What kind of regulation architecture can stimulate creative destruction and growth of two different types of new industries like telemedicine, and for-profit-hospital?” Online interview method was used to investigate the telemedicine industry and for-profit-hospitals at Daegu-Gyeongbuk province in South Korea and Cardiff-Wales in the UK. Findings provided following grounded theories. First, the way to create a converted new industry is not deregulation but regulation conversion. Though, deregulation helps to expand the modern market, it could disturb the emergence and growth of new markets. Second, the regulation can be an essential policy method to create emerging new markets when there are enough (potential) suppliers owing to technological developments or the accumulation of a new workforce equipped with new technologies. According to the UK for-profit-hospitals, regulations for consumer protection and decreasing transaction costs or complexity in the new market could trigger market creation. Third, digital transformation has motivated open innovation dynamics in all industries. The expanded open innovation dynamics with digital transformation can promote, most of all, the appearance of converted new industries like telemedicine.

Patents, innovation, and market entry

Do patents facilitate market entry and job creation? Using a 2014 Supreme Court decision that limited patent eligibility and natural language processing methods to identify invalid patents, I find that large treated firms reduce job creation and create fewer new establishments in response, with no effect on new firm entry. Moreover, companies shift toward innovation aimed at improving existing products consistent with the view that patents incentivize creative destruction.

“Resetting” the Neighbourhood: Residents’ Resistance to Place Destruction in Gränby, Uppsala

ABSTRACT By following tenants who resist the destruction of their common yards in a post-renoviction neighbourhood of Uppsala (Sweden), this article examines how the local resistance by marginalized communities intersects with the effects of the financialization of housing. The article explores the concept of unhoming, as a violent, structural, and multi-scalar process that, in the name of urban renewal, destroys the places of marginalized communities in the capitalist city. For residents in a post-renoviction neighbourhood, the real-life experience of “creative destruction” entails navigating paradoxical and conflicting discourses, inflicting material, immaterial and emotional harm to the residents. The local resistance play out as a demand for housing justice, and as a forced balancing between patient dialogue and more confrontative action, in an increasingly authoritative context. Finally, the article suggests the use of a theoretical frame of place destruction in the analysis of contemporary urban struggles.

Dynamic effects of tourism shocks on innovation in an open-economy Schumpeterian growth model

International travel restrictions during the COVID-19 pandemic drastically reduced the number of tourists. This study explores the dynamic effects of tourism shocks in an open-economy Schumpeterian model with endogenous market structure. A tourism shock affects the economy via a reallocation effect and an employment effect. A positive tourism shock increases employment, which raises production and innovation in the short run. However, a positive tourism shock also reallocates labor from production to service for tourists, which reduces production and innovation. If leisure preference is weak, the reallocation effect dominates, and the short-run effect of positive tourism shocks on innovation is monotonically negative. If leisure preference is strong, the employment effect dominates initially, and the short-run effect of tourism shocks on innovation becomes inverted-U, which is consistent with the stylized facts that we document using cross-country data. Finally, permanent tourism shocks do not affect the steady-state innovation rate in our scale-invariant model.

Towards an ethical awareness of entrepreneurs: a Nietzschean perspective on creative destruction

ABSTRACT As entrepreneurs engage in a Schumpeterian process of ‘creative destruction’, existing market norms and values are substantially altered, which places entrepreneurship in a central role for considering society’s new ethical demands. This essay attempts to fill a lacuna in the scholarship of entrepreneurial ethics that stops short of considering the ethical awareness of entrepreneurs regarding the reconstitution of values following disruption. The work of Friedrich Nietzsche informs our understanding of entrepreneurial ethics and provides guidance for ‘new philosopher’ entrepreneurs who become ethically aware of their task and endeavour to replace old values with new. Employing the lessons of Nietzsche can, therefore, provide valuable ethical insights for entrepreneurial ethicists as they consider what it might mean to engage in the disruption of industries, markets, and value chains.

E-commerce Transformation in Indonesia

This study investigates the interplay between entrepreneurial dynamism, innovation, and technological advancement in Indonesia's burgeoning e-commerce sector. Framed through the lenses of Creative Destruction and Disruptive Innovation, the research delves into the transformative impact of digital globalization on traditional business models. By tracing the historical development of e-commerce and scrutinizing the closure of offline stores in 2017, this study highlights the potential of digital globalization to disrupt established market players, paving the way for MSMEs to explore unconstrained market segments. The study introduces the Model of Disruption-Destruction Cycle, elucidating how entrepreneurs' innovations lead to technological advancements and business model transformations. These dynamics enrich our understanding of Indonesia's evolving digital economy. The contribution lies in its comprehensive analysis of the transformative forces redefining the e-commerce landscape. While the study presents valuable insights, it also acknowledges limitations, including the need for further empirical validation. Finally, this paper offers a platform for empirically validating and exploring the ever-evolving landscape of entrepreneurship, innovation, and technological advancement in Indonesia's e-commerce realm.

Do recessions induce Schumpeterian creative destruction? Micro Evidence from India

According to the Schumpeterian cleansing hypothesis, economic downturns force inefficient firms off the market, freeing resources that can be allocated to more efficient firms. India, as an emerging economy, may experience a similar reallocation. The study uses micro-level data for publicly traded firms, including manufacturing and services sector firms, from 1988 to 2020. We find that reallocation is productivity-enhancing in general, i.e., credit moves from firms with low productivity to firms with high productivity, and normal economic downturns induce this efficiency-enhancing reallocation. We also observe that reallocation is less efficiency-enhancing during the Indian financial crisis, and constraints on productive firms could be one of the potential explanations for the lack of a cleansing effect.

Common ownership and creative destruction: evidence from US consumers

Abstract How does common ownership affect creative destruction? What are the underlying mechanisms? Do the effects of increased common ownership vary among different customer segments? Using product-level data, we show that, on average, firms with greater common ownership introduce new products at a faster rate and discontinue existing products at a similar pace. The observed economic impacts intensify over time, reflecting the gradual nature of knowledge spillovers and the learning curve. Subsequent to an increase in common ownership, portfolio firms tend to both add and drop products that are dissimilar to those of their rival firms, with the net effect of decreasing between-firm product dissimilarity. We also find that the effects are more relevant for product modules with greater technological likeness, lower barriers to market entry, and greater numbers of product market players. Product variety is substantially greater in product lines catering to higher-income households. Overall, the result highlights the procompetitive effects of increased common ownership.

The relationship between labor market institutions and innovation in 177 European regions over the period 2000–2015

The main goal of this paper is to investigate the relationship between labor market institutions (LMIs) and patents in 177 NUTS-1 and NUTS-2 European regions. Fixed effects models, ordinary least squares (OLS), the generalized method of moments estimation of the fixed effects (FE-GMM), multilevel modeling (MLM), and spatial models are employed. Patents are negatively correlated with EPL and union density and positively associated with wage bargaining coverage and centralization. As a result, a uniform wage that is higher than the competitive wage can enable the Schumpeterian creative destruction process, forcing firms to invest in innovation to remain in the market. Spatial analysis emphasizes that regional proximity promotes the flow of knowledge and increases the chance of innovation. Interactions also matter. Increased bargaining power and coordination, in particular, may outweigh the negative consequences of isolated EPL reforms. Thus, policies that strengthen wage-setting institutions are required in Europe to boost innovation.

Losing trust when pursuing development: How automation hindered political trust in China?

The side effects of automation on the economy have been discussed frequently, but little is known regarding its political consequences. This paper examines the causal effect that automation induces on political costs for the local government. By combining the national individual-level panel data of political trust with the prefecture-level robot exposure rate in China, we find that the development of automation would reduce individuals’ political trust in the Chinese local government. Furthermore, we explore the channels through which the automation process could affect political trust, namely the risk of unemployment, intensified pessimism about local government, higher downside risk, and declining organization participation. This paper provides empirical evidence for the impact of automation and the source of political legitimacy, emphasizing the crucial role of governments in coping with technological progress and making good use of endogenous creative destruction.

Инновационное предпринимательство в эпоху глобальной нестабильности: стратегия поведения и факторы устойчивого управления проектами

The presented article is devoted to the study of the features of innovative entrepreneurship in the conditions of global instability. The author's position is that despite the failure of the mechanism of "creative destruction", innovative entrepreneurship remains the most important driver of socio-economic development. However, in order to remain an "innovator" in the world of ultra-dynamic changes, an enterprise needs a new behavior strategy that ensures the resistance and stability of its existence. Due to the lack of clear ideas about such a strategy, the author offers her own vision based on adaptability, proactivity (due to the ability of analytics and risk prevention), as well as planning the spatial location of production. In addition, the author wonders how the lack of clear behavioral business models in a chaotic external environment affects the ability to effectively manage business projects, and comes to the conclusion that the simple application of flexible methodologies without synchronicity with the values and behavioral incentives of the entrepreneur leads to a losing position and business amateurism. In this regard, the factors of sustainable project management are identified that can bring the methodology of their implementation in line with the requirements of unstable socio-economic conditions.

Creative destruction vs destructive destruction: A Schumpeterian approach for adaptation and mitigation

This article aims to demonstrate how a market exposed to a catastrophic event strives to find a balance between adaptation and mitigation policies through R&D strategies. Our analysis reveals that, within our framework, there exists no trade-off between adaptation and mitigation. Rather, the critical relationship exists between adaptation and pollution because adaptation (wealth accumulation) increases the growth rate of the economy, leading to a higher flow pollution due to the scale effect. We also investigate the long-run effects of pollution taxes on growth rates and the influence of the probability of catastrophic events on these outcomes. Our findings suggest that even with a higher likelihood of catastrophe, the economy can elevate its R&D endeavors, provided that the penalty rate stemming from an abrupt event remains sufficiently high and the economy confronts a risk of a doomsday scenario. Additionally, we illustrate that pollution taxes can foster heightened long-term growth, with the positive effects being more pronounced when the probability of catastrophe is elevated, assuming an adequately substantial penalty rate. Finally, we find that pollution growth can be higher with less polluting inputs due to a scale effect, a phenomenon akin to the Jevons-type paradox.

Industrial dynamics in the ICT technological paradigm: The case of Portugal, 1986–2018

Following Schumpeter, several scholars have shown that development follows long-term waves. These waves are prompted by radical innovations, which, until their full potential is exhausted, spread through incremental innovations and continuous learning and imitation processes. However, the discontinuity of technological progress often goes unnoticed in current debates on productivity slowdown, declining business dynamism and increasing market concentration. Our study, based on extensive microeconomic data from 1986 to 2018, examines how the ICT revolution has influenced business dynamism in Portugal. The Bai–Perron estimates show two structural breaks in industrial dynamics: an upswing in 1993 and a downturn in 2003. Our research also shows that during the late 20th century creative destruction was mainly driven by the expanding ICT sector. After 2003, however, firm dynamics became less turbulent, with less entry and job reallocation. Moreover, despite the increasing performance of a typical high-growth young firm, the incidence of startups has declined in the new century. Our results, therefore, suggest that reduced entry and increased exit risk have likely undermined the long-term disruptive potential of transformative entrepreneurship.