Process Of Creative Destruction Research Articles

An attempt to open up a new path of rural development? rural transformational development under the characteristic town strategy in China

ABSTRACT The global decline in rural areas has made rural transformational development a subject of significant interest. The Characteristic Town (CT) strategy, a prominent aspect of China’s recent urbanization efforts, focuses on innovative development methods to promote coordinated urban-rural growth and enhance capacity and quality. However, the mechanisms through which this strategy facilitates potential rural transformational development have not yet been investigated. This study addresses this gap by employing a case study approach, using desk research, participatory observation, semi-structured interviews, and questionnaires. The findings indicate that environmental transformation, achieved through targeted planning, design, and construction, is a prerequisite for the CT strategy to stimulate rural transformational development. Subsequently, economic transformation is a crucial step, which includes establishing a sustainable and systematic economic industrial system, local marketing and promotion, and facilitating private sector participation. The strategy also generates social effects, such as a modest improvement in living standards, a lack of public participation, changes in residents’ self-identity, and potential social estrangement between residents and newcomers. The rural transformational development driven by the CT strategy represents a process of creative destruction that progresses quickly, necessitating the consideration of various countermeasures.

Economic impacts of digital home-sharing platform: Creative destruction in the hospitality industry

This paper describes an empirical study that was conducted by applying creative destruction theory to examine structural changes in the hospitality industry due to the growth of digital home-sharing platforms. To achieve these research aims, the current study considered the hospitality industry, which encompasses the accommodation and restaurant sectors, as well as Airbnb, representing the digital home-sharing platform. The findings revealed that there is a significant relationship between the exit of the accommodation industry and the supply of the digital home-sharing platform, while both entry and exit in the restaurant industry are significantly associated with the supply or performance of the digital home-sharing platform. Over time, this leads to industry transformations as certain segments of the lodging industry are replaced by digital home-sharing platforms, and as the restaurant industry undergoes a process of creative destruction, with establishments unable to adapt to changing business environments and the emergence of new facilities tailored to new technologies or accommodation models.

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.

Why generative AI can make creative destruction more creative but less destructive

AbstractThe application of machine learning (ML) to operational data is becoming increasingly important with the rapid development of artificial intelligence (AI). We propose a model where incumbents have an initial advantage in ML technology and access to (historical) operational data. We show that the increased application of ML for operational data raises entrepreneurial barriers that make the creative destruction process less destructive (less business stealing) if entrepreneurs have only limited access to the incumbent’s data. However, this situation induces entrepreneurs to take on more risk and to be more creative. Policies making data generally available may therefore be suboptimal. A complementary policy is one that supports entrepreneurs’ access to ML, such as open source initiatives, since doing so would stimulate creative entrepreneurship.

Schumpeterian creative destruction and temporal changes in business models of US banks

Schumpeter theorizes that capitalism is characterized by a constant process of creative destruction. Newcomers introduce disruptive innovations and technologies that replace older, less efficient business practices. Thus, established firms must either continually adapt or perish. Christensen (1997) argues that large, established firms cannot innovate as fast as newcomers and thus are likely to perish over time. We test these predictions in the setting of the United States banking sector. We examine banks' credit and liquidity risks as proxies for their business models, as well as their reliance on brokered deposits, commercial real estate loans, off-balance sheet items, and noninterest income as proxies for operational strategies. We find that banks' credit and liquidity risks increased significantly over the last 40 years or so, indicating a steady change in banks' business models. This trend stems primarily from progressively aggressive business models introduced by incoming cohorts. Older cohorts respond to changing market conditions by increasing the aggressiveness of their own business models, but not as much as the newcomers. Surprisingly, surviving large banks among older cohorts change their business models faster than smaller banks from the same cohorts. Thus, while we find support for Schumpeterian creative destruction and Christensen's (1997) arguments, we also find that large and established banks are better able to adapt to new market conditions, perhaps because they have superior access to resources and talent necessary to implement transformation. Our findings at least partly explain why the dominant players in the US banking sector have remained the same decade after decade.

The impact of firm-level Covid rescue policies on productivity growth and reallocation

We evaluate the impact of Covid-19 rescue policies on both firm-level and aggregate productivity growth, exit, and creative destruction. Using administrative data on the universe of firms’ support mechanisms in Flanders over 2019–2021, we first estimate the causal impact of this support program on firm-level outcomes. Firms that received support saw a 4%–5% increase in productivity, compared to similar firms that applied for, but did not obtain support. The productivity premium effect is temporary however: by the last quarter of 2021, treated firms are indistinguishable from untreated firms. Support measures also drastically reduced firm failure. The propensity to exit the market was 45% lower for treated firms, and if no support would have been issued, aggregate firm exit would have increased by 9%. We decompose aggregate productivity growth, a share-weighted average of firms’ productivity growth rates, into several components. Within firms over time, both treated and untreated firms contribute positively to aggregate productivity growth. There are signs of insufficient creative destruction on both the extensive margin (firm entry and exit) and intensive margin (reallocation of market shares to more productive firms) during the crisis. However, insufficient reallocation was already present well before the crisis, and there is no evidence that this inefficiency is driven by the contribution of treated firms in particular. Firm-level support measures helped firms to avoid exit, and to temporarily increase productivity, while not altering the ongoing process of creative destruction in the aggregate.

Mathematical Model of the Cyclic Process of Introducing New Technologies

Based on Schumpeter’s process of creative destruction, we propose a qualitative model of the cyclic process of introducing new technologies. The model consists of a variable structure system with switchings between three globally stable dynamical subsystems. The switchings between regimes make it possible to describe the process of departing the system from the equilibrium state in the process of introducing new technologies. The alternation of regimes implies lack of equilibrium for the variable structure system despite the global stability of its subsystems. This mathematical fact corresponds to a typical situation in real economic systems during the renovation period. The proposed model shows the global cyclicity of the process of introducing new technologies. In the case of an unsuccessful technology introduction, we establish the existence of a closed trajectory of the system.

Social Enterprises, Cooperatives or Benefit Corporations? On Reconciling Profit and the Common Good in Doing Business from a Polish Perspective

The aim of the article is to demonstrate that economic, technological and social changes, also thanks to the principle of sustainable development, lead to the transformation of existing and the emergence of new hybrid forms of conducting business activity. On one hand, there is a noticeable expansion of social economy mechanisms that reflect an ‘economic’ approach to providing broadly defined goods and services in the public interest, and there is also resurgence of democratic member-based organizations (DMOs), such as cooperatives with their dual nature and social and economic dimensions. On the other hand, traditional forms of for-profit business are transforming into entities that integrate social and environmental goals into business, known as Sustainability-Driven Hybrid Business Models (SHBMs), and of which benefit corporations (like U.S. Benefit Corporation or Social Purpose Corporation, Italian Societ. Benefit or French Soci.t. . mission) are an example. The transformation and emergence of these qualitatively new organizations is an illustration of the process of creative destruction described by Joseph Schumpeter. The article presents advantages and disadvantages associated with the benefit corporations. The analysis is concluded with the open question of whether legislative intervention is needed in this area, in particular whether it would be expedient to introduce ‘mission companies’ in Poland.

A Year Older, A Year Wiser (and Farther from Frontier): Invention Rents and Human Capital Depreciation

Abstract We look at how the arrival of an invention affects wage returns and probability of moving out of employment for white- and blue-collar coworkers of the inventor. First results suggest that older workers are hurt by the arrival of an invention. This negative effect disappears when we control for education and, in particular, for time that since obtaining the last formal degree, i.e., distance to human capital frontier. If anything, this effect is slightly higher for non-STEM than STEM-educated co-workers. This result suggests that retraining programs could be helpful in making the process of creative destruction and economic growth more inclusive.

Destructive creation, creative destruction, and the paradox of innovation science

AbstractInnovation or the creation and diffusion of new material, social and cultural things in society has been widely studied in sociology and across the social sciences, with investigations sufficiently diverse and dispersed to make them unnavigable. This complexity results from innovation's importance for society, but also the fundamental paradox underlying innovation science: When innovation becomes predictable, it ceases to be an engine of novelty and change. Here we review innovation studies and show that innovations emerge from contexts of discord and disorder, breaches in the structure of prior success, through a process we term destructive creation. This often leads to a complementary process of creative destruction whereby local structures protect and channel the diffusion of successful innovations, rendering alternatives obsolete. We find that social scientists naturally focus far more on how social and cultural contexts influence material innovations than the converse. We highlight computational tools that open new possibilities for the analysis of novel content and context in interaction, and show how this brings us empirically toward the broader range of possibilities that complex systems and science studies have theorized—and science fiction has imagined—the social, cultural and material structures of innovation conditioning each other's change through cycles of disruption and development.

‘이응노의집’과 새롭게 이응노 활용하기: 창조적 파괴의 개념을 통해 본 이응노의 예술세계와 ‘이응노의집’의 미래경영

Since the early 2000s, a large number of public art museums have opened in Korea, marking public recognition of the importance of such museums. The number of public art museums will continue to grow at an increasing rate, further strengthening their influence on the society. This study intends to examine the current state of public artist museums in Korea, and then focus specifically on Maison d’Lee Ungno which opened in 2011 to commemorate Lee Ungno’s art world. It also aims to propose a future management plan for Maison d’Lee Ungno based on the concept of creative destruction. Creative destruction, a notion put forward by Joseph Schumpeter, is a process of innovating existing practices through the continual combination and adoption of new ideas. Given the relative absence of modern art museums dedicated to particular artists in Korea, the proposed plan shall incorporate the creative destruction process as its core strategy.

Creative Destruction Path Selection for Industrial Park Transformation and Upgrading under the Concept of Character Town in the Era of Big Data

With the reshuffle of the global industrial structure, some industrial parks in China are facing problems such as unclear industrial positioning, unclear agglomeration effect, and lack of impetus for independent innovation. It is urgent to seek a way of transformation and upgrading. The arrival of the era of big data also provides new opportunities for the transformation of China’s industrial parks. In this context, the model of “character towns” proposed by Zhejiang Province provides a new concept for breaking the bottleneck of industrial park transformation and also provides a platform and space for the application of data technology and digital governance in the era of big data. Based on the theory of creative destruction and self-organization, this paper holds that the essence of industrial park transformation under the concept of character towns is the self-organization process of creative destruction and high-quality reconstruction. After sorting out the development process of parks in China, this paper divides industrial parks into production-oriented parks, consumption-oriented parks, and trade-oriented parks according to the economic activities classified by classical economics. By constructing a six-stage creative destruction model, this paper analyzes the path selection of transformation and upgrading of three types of parks under the concept of character towns and proposes that industrial structure replacement for the production-oriented parks, upgrading the consumption structure for the consumption-oriented parks, and change of trade control points for the trade-oriented parks are the possible transformation paths for the three types of parks.

Disruptive innovation: Low-cost clinics in northeast Brazil

A characterization of innovation for companies that are already entering or entering the market shows a dynamic movement in a circular movement that, both can generate new organizations and create a new market for existing organizations, or eliminate them, concretizing or process of creative destruction. The paper approach was directed to the concept of disruptive innovation and its characterization in popular health clinics. A research, multi-method, exploratory and descriptive was carried out through structured interviews, using as a method to analyze lexicometry and its modalities. From data analysis, it was identified that popular clinics have disruptive potential.

Cultural and creative sectors at a crossroad: from a mainstream process towards an active engagement

The COVID-19 pandemic has led to a current global health crisis with dreadful repercussions all over the world. A global economic recession is anticipated, with strong impacts in all economic and social sectors, including the cultural sector. Although all sub sectors will be impacted (heritage sites, theatres, museums, operas, art galleries), the cultural built heritage is particularly at stake, as it relies on multiple stakeholders through a wide range of heritage-related activities (tourism, recreation, housing, real estate, construction, craftsmanship, etc.). Sites management and heritage conservation have not only been vulnerable to strong economic and social disruptions, like most of other cultural fields, but have been greatly challenged because heritage values and the paradigm of conservation (50 years after adoption of the UNESCO convention) are being themselves revisited in the perspective of the Sustainable Development Goals. The paper aims also to consider cultural heritage as part of the Cultural and Creative Sectors (CCS) and how creativity and innovation contribute to post-COVID recoveries through Schumpeter-related creative destruction process. The current crisis might be perceived in a perspective of long wave theory of innovations and economic growth. The economic history is filled with many examples of such transition period when inventions, innovations, and growth reactivate the economic development in an upward long-term trend. In such framework, crisis can trigger innovation and creativity and can be understood as opportunity to increase the CCS resilience and sustainability, as well as harness the universality and the power of creativity. Finally, the paper aims to describe implications of such situation by providing to the CCS ways to learn and experience cultural entrepreneurship, resilient strategies, new sustainable and circular business models applied to the cultural heritage sector and its conservation.

A MODEL OF CREATIVE HERITAGE FOR INDUSTRY: DESIGNING NEW RULES WHILE PRESERVING THE PRESENT SYSTEM OF RULES

AbstractIn industry, there is at once a strong need for innovation and a need to preserve the existing system of production. Thus, although the literature insists on the necessity of the current change toward Industry 4.0, how to implement it remains problematic because the preservation of the factory is at stake. Moreover, the question of the evolution of the system depends on its innovative capability, but it is difficult to understand how a new rule can be designed and implemented in a factory. This tension between preservation and innovation is often explained in the literature as a process of creative destruction. Looking at the problem from another perspective, this article models the factory as a site of creative heritage, enabling creation within tradition, i.e., creating new rules while preserving the system of rules. Two case studies are presented to illustrate the model. The paper shows that design in the factory relies on the ability to validate solutions. To do so, the design process can explore and give new meaning to the existing rules. The role of innovation management is to choose the degree of revision of the rules and to make it possible.

Throwing good money after bad: Zombie lending and the supply chain contagion of firm exit

This paper studies whether the bailout of downstream firms helps stop the supply chain propagation of business failure. By analyzing persistent zombie lending in China, we show that such a bailout policy does not work. Zombie lending to downstream firms does not reduce the exit likelihood of upstream firms. Worse, it distorts efficiency-based firm exit in upstream industries. The exit distortion effect works through the trade credit chain and is more profound in industries with stricter financial constraints and tighter supply chain connections. Our findings reveal the importance of credit allocation efficiency for the Schumpeterian process of creative destruction that is essential for economic growth.

Trade and Innovation

Two central insights from the Schumpeterian approach to innovation and growth are that the pace of innovation is endogenously determined by the expectation of future profits and that growth is inherently a process of creative destruction. As international trade is a key determinant of firm profitability and survival, it is natural to expect it to play a key role in shaping both incentives to innovate and the rate of creative destruction. In this paper, we review the theoretical and empirical literature on trade and innovation. We highlight four key mechanisms through which international trade affects endogenous innovation and growth: (i) market size; (ii) competition; (iii) comparative advantage; (iv) knowledge spillovers. Each of these mechanisms offers a potential source of dynamic welfare gains in addition to the static welfare gains from trade from conventional trade theory. Recent research has suggested that these dynamic welfare gains from trade can be substantial relative to their static counterparts. Discriminating between alternative mechanisms for these dynamic welfare gains and strengthening the evidence on their quantitative magnitude remain exciting areas of ongoing research.

Destruction and reconstruction of the capital structure

One of the entrepreneurial strategies that, according to Schumpeter, is responsible for the capitalistic process of Creative Destruction is the introduction of a new method of production (Schumpeter 2003, 83).
 Austrian economics characterizes a «method of production» as a set of capital goods and original factors of production inserted into an entrepreneurial plan, which is directed to satisfy consumer needs. Therefore, we could say that capital goods do not work in isolation, but as parts of two structures: they develop a role in the individual plan of the entrepreneur and also in the spontaneous social order that unintentionally results from the coordination of the different entrepreneurial plans.
 In this context, the introduction of a new method of production implies that at least one entrepreneur tries to modify his plan either by rearranging his combination of capital goods and original factors of production (due to a change in consumer preferences or due to the appearance of some new technology) or by using new capital goods or new original factors of production (due to the discovery of a new technology or due to an increase in savings). Thus, both cases require the entrepreneur to disrupt not only his previous plan, but also the existing links with other plans in the incumbent capital structure.
 This obviously raises the question of whether these disruptions lead to a progressive and sustained capital accumulation or if, on the contrary, they cause a necessary destruction of some capital goods.
 At least since Cantillon and Turgot economists have taught that progress and growth depend partially on the quantity of capital, which tends to increase gradually with the level of savings. However, Schumpeter’s claim —that the introduction of a new method of production implies a Creative Destruction process— seems to suggest that some capital will be lost with the new investments. We would have, on the one hand, more capital by means of the creation of new plans but, on the other, less capital because of the disruption of the existing plans.
 Although this approach may be initially shocking, only by departing from the erroneous idea that all capital goods are homogeneous one could consistently claim that new methods of production do not destroy any capital at all, i.e., only supposing that capital goods combinations and structures are irrelevant in relation to their final output, the view of a non-disturbable capital accumulation could be held. Once heterogeneity of capital goods comes into the picture, it is no longer possible to believe in such a hypothesis.

Data Strategy and Data Trust – Drivers for Business Development

Data is the new oil – which has often been heard since the end of the 90th. However, many companies took too long to exploit the new technological options for their business. It has been proven that the digital disruption led to seemingly stable and well-known brands disappearing from their market. Insufficient data competence is one of the reasons why companies failed in the escalating process of creative destruction. In this document we address three competence dimensions: data architecture, data preparation and the interchange of data. The competence in these fields is a precondition for a company’s decision-making process to lead successfully to profitability.

Anti-Ideology of Entrepreneurship as an Attribute of Entrepreneurial Projects

Aim. The presented study examines and develops theoretical and methodological foundations that make it possible to distinguish innovative entrepreneurship among other economic phenomena.Tasks. The author identifies the specific features of entrepreneurship and its qualitative differences from other types of economic activity aimed at obtaining benefits, specifies the relationship between creative destruction and economic development, determines the attributes of innovative entrepreneurship.Methods. This study uses systematic analysis of professional literature on entrepreneurship to highlight the main attributes of entrepreneurial activity. The methodology of dialectical contradiction in its original Hegelian interpretation plays an important role in elaborating and substantiating the definition of entrepreneurship. The author considers innovative activity as creation of new values, which, according to the logic of dialectical development, destroy the old ones, triggering the process of economic development.Results. An approach to understanding the phenomenon of entrepreneurship is proposed, making it possible to distinguish this type of activity as significantly different from other types of economic activity, which may be externally similar but have different content. During the development of this approach, the concept of “anti-ideology” of entrepreneurship is introduced, which reflects the essence of innovative activity as a process of creative destruction. The necessary and sufficient attributes of entrepreneurial innovation are identified, making it possible to reflect the meaning of this phenomenon and verify this complex defining structural element in the system of economic relations. The study substantiates that the level of anti-ideology and public benefit can be used as criteria for assessing the significance of an entrepreneurial idea. A progressive model of anti-idea realization (PMA) is proposed based on the methodological principle. It can be used to develop an efficient system for evaluating startups within the framework of venture capitalism.Conclusions. Specification of the relationship between creative destruction and economic development is crucial to understanding the importance of innovative entrepreneurship. Each historical period creates its own demand for a specific type of entrepreneurs. The principle of anti-ideology, which lies at the heart of the PMA model, is key in identifying competitive commercial ideas, making it possible to focus resources and attention on projects that can make a significant contribution to economic development.