Schumpeter Mark Research Articles

Intellectual monopolies as a new pattern of innovation and technological regime

Abstract Building on Schumpeter Mark I and Mark II, I propose an additional pattern of innovation and technological regime called the intellectual monopoly (IM) to explain the co-habitation of large incumbent firms with high entry and exit rates and provide evidence for pharmaceuticals and information technologies. I associate the IM pattern and technological regime with corporate innovation systems and illustrate that patterns not only evolve after changes in technological regimes but also due to economic, political, and institutional transformations.

To Be or Not to Be: The Entrepreneur in Neo-Schumpeterian Growth Theory

Based on a review of 700+ peer-reviewed articles since 1990, identified using text mining methodology and supervised machine learning, we analyze how neo-Schumpeterian growth theorists relate to the entrepreneur-centered view of Schumpeter Mark I and the entrepreneurless framework of Schumpeter Mark II. The literature leans heavily toward Schumpeter Mark II; innovation returns are modeled as following an ex ante known probability distribution. By assuming that innovation outcomes are (probabilistically) deterministic, the entrepreneur becomes redundant. Abstracting from genuine uncertainty, implies that central issues regarding the economic function of the entrepreneur are overlooked such as the roles of proprietary resources, skills, and profits.

The evolution of the industrial value chain in China's high-speed rail driven by innovation policies: A patent analysis

High-speed Rail (HSR) is one of the most technological breakthroughs in passenger transportation over the last decades. The rapid development of China's High-speed Rail (CRH) is astonishing. However, it seems to be a “black box” how China has achieved great success in the CRH industry for many organizations or scholars. The paper proposes a novel approach to identify the critical components of an industry value chain and then gains insight into why systemic policies can drive significant breakthroughs in the CRH industry. Our findings highlight that both large companies and universities have played a vital function in the process of technology innovation. Besides, the incentive policies induce many innovators to carry out competition and cooperation, which results in forming and perfecting the industrial value chain. Innovation policies facilitate the evolution of the industrial value chain though there is a time lag of incentive effect. In contrast, the perfect industry value chain contributes to achieving the success of technology innovation. The paper provides insight into the incentive effect of public policies on technology innovation that falls into the scope of Schumpeter Mark II, which can help policymakers perfect incentive policies and managers implement appropriate patent strategies for developing new emerging technologies.

Blockchain as Schumpeter Mark 1 or Mark 2? An empirical analysis of blockchain job offers in France and Germany

AbstractThis article investigates whether blockchain technology corresponds to Schumpeter Mark 1 or Mark 2 industrial dynamics. Using an original database of 385 job offers in three different domains, namely, blockchain, biotechnology, and storekeeping, posted by 285 companies in France and Germany in early 2019, we explore whether the usual Schumpeter Mark 1 and 2 attributes apply to blockchains. We use ordered multinomial probit models to explain the level of work experience demanded by companies. To our knowledge, this contribution is one among very few attempts to identify the main features of blockchain industrial dynamics.

Growth, Concentration and Inequality in a Unified Schumpeter Mark I + II model

I develop a simple Schumpeterian agent-based model where industries are born and evolve endogenously and use it to study the interrelation between technological change, economic growth, market concentration and inequality. This theoretical model combines features from the Schumpeter Mark I (centering around the entrepreneur) and Mark II model (emphasizing the innovative capacities of firms), and is capable of reproducing a large set of stylized facts concerning growth, market concentration, inequality and productivity. Among others, the model can reproduce the industry life-cycle, a Kuznets curve, a Piketty-style increase of inequality in “mature” economies, as well as recent stylized facts on “declining business dynamism”. I conduct an extensive policy analysis to identify the parameters that produce these stylized facts in the model. Notably, the empirically-grounded assumption that the difficulty to imitate a firm depends on its technological distance to the imitator can explain prominent stylized facts of economic development since the 1980s. However, growth in the number of industries triggered by the exploitation of new technological opportunities can prove to be a counteracting force to these tendencies in the short run. Thus, the model suggests a wave-like evolution of growth, inequality and market concentration centered around advances in basic research.

Weaker jobs, weaker innovation. Exploring the effects of temporary employment on new products

ABSTRACTThis work explores the relationship between temporary employment and product innovation focusing on five major European economies (France, Germany, Italy, Spain and the Netherlands) observed between 1998 and 2012. The analysis distinguishes sectors according to their technological characteristics and regimes finding that industries using temporary employment tend to have a weaker product innovation propensity. The negative correlation between temporary employment and innovation turns out to be stronger in those sectors where tacit firm’s specific knowledge is crucial to the development of innovations. These sectors are identified using both the ‘Cumulativeness’ proxy stemming from Peneder’s classification as well as distinguishing between different Schumpeterian regimes – Schumpeter Mark I vs. II – of knowledge accumulation.

Grassroots Innovation:Minds on the Margin are not Marginal Minds

Innovation, a buzzword in the globalized world economy, predominantly refers to technological changes within the formal sector, although the genealogy of the word shows its use in ancient and medieval times with a negative connotation. This was not an important concept until the 'Schumpeter Mark I&II' that has changed its understanding and revolutionized the field of innovation studies. Also, the agents of change in Mark I, i.e. individual innovators were replaced by firms in Mark II. However, at the turn of the 21st century, scholars and policymakers once again focused on individual innovators, especially in the informal sector in India. This book is a timely intervention in terms of highlighting the contribution of these 'unsung heroes' or the 'grassroots innovators', as termed by the author Anil Gupta.

Industry innovativeness, firm size, and entrepreneurship: Schumpeter Mark III?

Emphasizing the dynamics in economies and industries, Schumpeter points to entrepreneurs carrying out ‘new combinations’. His work, and in particular the Theory of Economic Development, is often interpreted as praising individual entrepreneurs setting up new firms to contribute to an industry’s innovativeness. This has come to be referred to as the Schumpeter Mark I perspective. Later, however, in his Capitalism, Socialism, and Democracy, Schumpeter has rather suggested that large incumbents are best positioned to contribute to an industry’s innovativeness (Schumpeter Mark II). In this discussion, however, the possibly different effects of structural as opposed to dynamic industry competitiveness is often not taken into account. In addition, the contribution of new and small firms to industry innovativeness are often conflated. Using New Product Announcements as a measure of innovation, we find that industries dominated by small firms prove consistently and significantly more innovative than industries where large firms dominate. Taking account of industries’ structural and dynamic levels of competition, we find that high existing and increasing levels of new firms entering an industry, exercising what Schumpeter called the ‘entrepreneurial function’, actually decrease industry innovativeness. We conclude that the contribution of small firms in terms of industry innovativeness is different from that of large as well as new firms, suggesting a Schumpeter Mark III perspective.

Entrepreneurship and innovation in emerging economies

Purpose– After presenting a brief review of the Schumpeterian and Kirznerian views on entrepreneurship, the purpose of this paper is aims to measure the two views within the economic and institutional contexts of emerging economies.Design/methodology/approach– Configurations of innovative entrepreneurship, opportunity entrepreneurship and contextual variables were assessed using cluster analysis on 16 emerging countries.Findings– Four profiles were found: innovative entrepreneurship of the Schumpeter Mark I type, innovative entrepreneurship of the Schumpeter Mark II type, opportunity entrepreneurship of the Kirznerian form and a fourth cluster described as a potentially emerging Schumpeter Mark II profile. The economic and governance indicators were favorable in the two innovative entrepreneurship clusters, whereas the contextual indicators of innovation were particularly favorable in the Schumpeter Mark II group.Research limitations/implications– The study demonstrated the importance of aligning theory, methods and context in comparative entrepreneurship research. Profiling countries on theory-based entrepreneurial dimensions appears as a viable approach. However, the results also pointed to the need for more attention to the dynamic aspects of country entrepreneurial activity. Another limitation lies in the low number of emerging countries for which complete comparable data are available.Practical implications– For policy makers, it may be interesting to examine our results showing that the economic and governance correlates are more favorable in the two innovative clusters.Originality/value– The study is one of the few recent attempts to clarify the relationship between entrepreneurship and innovation in the context of emerging economies.

Technological Regimes and the Creative Destruction of Natural Monopolies: Exploring the Impact on Electricity Distribution Utilities Using a Sectoral Systems of Innovation Approach (Extended Abstract for Conference Poster Presentation)

The research makes the following theoretical contributions to the literature on sectoral systems of innovation. Firstly, in contrast to prior studies of firms and sectors in competitive markets this study has examined, in real time, how monopoly incumbent firms are responding to technological and market discontinuities. Secondly, the study shows how technological and market discontinuities are driving substantial changes to the patterns of innovation activities to the extent that may result in a shift from a Schumpeter Mark II model to a Schumpeter Mark I model of innovation activities. Thirdly, the study expands our understanding of the dynamic interplay between technological regimes, actors and networks, demand and institutions and how these combine to impact the patterns of innovation activities and changing boundaries of a sectoral system of innovation. Fourthly, the study show how role of formal institutions co-evolves over time in conjunction with the changing sectoral boundaries. Finally, the study shows that whilst a sector may share many common attributes between countries during times of stability, technological and market discontinuities may impact each country differently and drive divergent sectoral evolutionary trajectories.

Schumpeterian patterns of innovation and the sources of breakthrough inventions: evidence from a data-set of R&D awards

This paper examines the relationship between Schumpeterian patterns of innovation and the generation of breakthrough inventions. Our data source for breakthrough inventions is the “R&D 100 awards” competition organized each year by the magazine Research & Development. Since 1963, this magazine has been awarding this prize to 100 most technologically significant new products available for sale or licensing in the year preceding the judgment. We use USPTO patent data to measure the relevant dimensions of the technological regime prevailing in each sector and, on this basis, we provide a characterization of each sector in terms of the Schumpeter Mark I/Schumpeter Mark II archetypes. Our main finding is that breakthrough inventions are more likely to emerge in ‘turbulent’ Schumpeter Mark I type of contexts.

Technological regimes, Schumpeterian patterns of innovation and firm-level productivity growth

The paper investigates the relationships between technological regimes and firm-level productivity performance, and it explores how such a relationship differs in different Schumpeterian patterns of innovation. The analysis makes use of a rich dataset containing data on innovation and other economic characteristics of a large representative sample of Norwegian firms in manufacturing and service industries for the period 1998-2004. First, we decompose TFP growth into technical progress and efficiency changes by means of data envelopment analysis. We then estimate an empirical model that relates these two productivity components to the characteristics of technological regimes and a set of other firm-specific factors. The results indicate that: (1) TFP growth has mainly been achieved through technical progress, while technical efficiency has on average decreased; (2) the characteristics of technological regimes are important determinants of firm-level productivity growth, but their impacts on technical progress are different from the effects on efficiency change; (3) the estimated model works differently in the two Schumpeterian regimes. Technical progress has been more dynamic in Schumpeter Mark II industries, while efficiency change has been more important in Schumpeter Mark I markets.

Schumpeterian competition, technological regimes and learning through knowledge spillover

This paper builds upon Winter (1984) in which the author discusses two views of Schumpeter on competition. Specifically, technological regimes and the role of knowledge spillovers for innovation are examined. An agent-based simulation model is formulated which captures the relevant aspect of competition between firms in an innovative industry. Results of the simulation runs indicate that at first, the technological development in terms of process and product innovations is better in an industry that is characterized by Schumpeter Mark II conditions. But the improved technological development is connected with higher prices and profits, which could be interpreted as a trade-off between static and dynamic efficiency. Second, in both scenarios market and industry concentration rises over time, showing a strong separation between successful firms and those lagging behind in technological terms. And third, surprisingly firms in a Schumpeter Mark I regime seem to be more technologically specialized. Furthermore, this article proves that a replication of simulation models is possible and useful.

Perspectives for the European ICT Industry (Les Perspectives Du Secteur Des Tic En Europe)

We present the main trends of evolution of the ICT sector. Its dynamics, supported by a constant technical progress in Ics, compounded with non convexities such as network effects and high sunk costs, may either lead to a Schumpeter Mark I or Schumpeter Mark II competition regime. This means that in some segments, the market will be more competitive (Mark I), while in other it will be more monopolistic (Mark II). But a key trend is also the so called convergence. Digitization makes it cost effective to integrate different communications, information processing and entertainment systems and devices. Hence, Schumpeter Mark II grows at the core where software production dominates, while Schumpeter Mark I is established at the periphery.In this context, the European ICT industry is potentially smashed between two forces : the cost advantages of Asian countries and the inventiveness and dynamism of the US industry. The way out of this very difficult situation is to create the conditions of restoring knowledge accumulation in a key sub-sector of ICT, software production. To do this, Europe can rely on its tradition of cooperation and knowledge sharing and on a set of institutions that have shown their ability to stimulate inter-regional cooperation. By concentrating on an ambitious project of open source software production in embarked systems and domestic networks, Europe could reach several objectives : to make freely accessible an essential facility, to stimulate competition, to help reaching the Lisbon objectives and to restore the European competitiveness in ICT.

Currents and sub-currents in innovation flows: Explaining innovativeness using new-product announcements

The creation of new knowledge is a haphazard process: not every sector in an economy is equally involved. The effect of industry structure on innovativeness has been a focus of attention for a long time by both academics and policymakers. In a much quoted article, using unique data – new-product announcements – Acs and Audretsch [Acs, Z.J., Audretsch, D.B., 1988. Innovation in large and small firms: an empirical analysis. American Economic Review 78(4), 678–690] identified several characteristics of industry structure and their effects on innovativeness. By analyzing a new and more consciously compiled database, we re-examine their original claims. Our results largely support their findings: industry concentration and degree of unionization for instance hamper innovation; skilled labor promotes it. Our findings diverge in one significant respect from theirs: we suggest that the large firms do not contribute more to an industry’s innovativeness than small firms. At the industry level, we find strong support for the Schumpeter Mark I perspective of creative destruction by small firms rather than creative accumulation by large firms. In addition, we show that less dedicated innovators prove more susceptible to firm-external industry factors than more committed innovators. An unfavorable competitive environment decreases the likelihood that less successful innovators will announce new products.

Patterns of innovation among firms and their relationship with innovative results

In accordance with evolutionary theory, it seems to be accepted that one single universal form of organisation of innovative activities for all companies does not exist. This argument implies that studies about classifications of patterns of innovation in different countries are becoming more and more frequent. The aim of this paper is to apply this internationally extended analysis to Spanish firms and to connect it with the innovative results. Based on an analysis of 152 innovative companies, empirical findings confirm the existence of diversity in the innovative process followed by Spanish firms. Five patterns of innovation are defined and characterised according to generic and technological variables. These patterns are associated with industrial sectors and scientific fields. One of the patterns is recognised within Schumpeter Mark II, characterised by creative accumulation. This pattern allows the best innovative result to be achieved.

Technological Regimes and Schumpeterian Patterns of Innovation

This paper proposes that the specific pattern of innovative activities in an industry can be explained as the outcome of different technological (learning) regimes. A technological regime is defined by the particular combination of technological opportunities, appropriability of innovations, cumulativeness of technical advances and properties of the knowledge base. Building upon the distinction between Schumpeter Mark I and Schumpeter Mark II industries, this paper provides empirical estimates of the relationships between indicators of the Schumpeterian patterns of innovation (concentration of innovative activities, stability in the hierarchy of innovators and importance of new innovators) and indicators of the variables defining technological regimes.

Schumpeterian patterns of innovation are technology-specific

This paper examines the patterns of innovative activities at the technological and country levels, using patent data for 49 technological classes in six countries (USA, Japan, Germany, France, United Kingdom and Italy). It is shown that the patterns of innovative activities differ systematically across technological classes, but are remarkably similar across countries for each technological class. In particular, two groups of technological classes are identified: ‘ Schumpeter Mark I’ and ‘ Schumpeter Mark II’. In these two groups innovative activities are structured and organized in different ways. The first represents a widening pattern: concentration of innovative activities is low, innovators are of small economic size, stability in the ranking of innovators is low and entry of new innovators is high. The second represents a deepening pattern: concentration of innovative activities is higher than in the first group, innovators are of larger economic size, stability in the ranking of innovators is greater, and entry is lower. The former group comprises mechanical technologies and traditional sectors, while the latter includes chemicals and electronics. This result suggests that technology-related factors (such as technological regimes, defined in terms of conditions of opportunity, appropriability, cumulativeness and properties of the knowledge base) play a major role in determining the specific pattern of innovative activities of a technological class across countries. Within these constraints, country-specific factors introduce differences across countries in the pattern of innovative activities for a specific technological class. Finally, the relationships between the specific features of the patterns of innovative activities and international technological specialization are examined. Technological advantages appear in general to be linked to higher degrees of asymmetries among innovators, higher stability of the ranking of innovators, smaller economic size of the innovating firms and lower entry rates of new innovators. These relationships, however, are different in the two groups of technological classes. In Schumpeter Mark I (widening) technological classes, international technological specialization is associated with relatively higher degrees of asymmetries among innovators and entry of new innovators (as well as smaller firm size) while in Schumpeter II (deepening) technological classes, international technological specialization is linked to the existence of a stable but competitive core of persistent innovators.

The evolution of corporate entrepreneurship in Swedish industry?was Schumpeter wrong?

This paper analyzes the evolution and role of corporate entrepreneurship in Swedish industry, particularly for the 1945–1980 period, based on data on the 100 economically most important innovations during this period. Privately owned large corporations (Schumpeter Mark II) dominated in launching innovations in almost all industrial sectors and in all subperiods but decreasingly so. 20% of the innovations were launched by new firms (Schumpeter Mark I) but most of these new firms were spun-off and/or acquired by large corporations. State entrepreneurship was marginal. Universities played an important role, although sector-specific. New firms and existing firms had similar growth rates and almost identical and short gestation times to international markets for their innovations. 80% of the corporate innovations were product renewals rather than product diversifications or process innovations. No evidence of an evolution from autonomous over corporate to state entrepreneurship, as hypothesized by Schumpeter, was found. Evolution of a dynamic coexistence of. these forms of entrepreneurship is hypothesized in this paper. The paper finally presents a model, synthesizing Schumpeter Mark I and II, for analyzing technological change and entrepreneurship.

Schumpeterian patterns of innovation

Using patent data for four countries (Germany, France, United Kingdom and Italy) for the period 1968-1986, the authors find that the patterns of innovative activities differ systematically across technological classes, while remarkable similarities emerge across countries in the patterns of innovative activities for each technological class. This result strongly suggests that 'technological imperatives' and technology specific factors (closely linked to technological regimes) play a major role in determining the patterns of innovative activities across countries. Schumpeter proposed two major patterns of innovative activities. The first one, labelled by Nelson and Winter (1982) and Kamien and Schwartz (1982) as Schumpeter Mark I, is proposed in The Theory of Economic Development (1934). In this work, Schumpeter examined the typical European industrial structure of the late nineteenth century characterised by many small firms. According to this view, the pattern of innovative activity is characterised by technological ease of entry in an industry and by a major role played by new firms in innovative activities. New entrepreneurs come in an industry with new ideas, new products or new processes, launch new enterprises which challenge established firms and thus continuously disrupt the current ways of production, organisation and distribution and wipe out the quasi rents associated with previous innovations. The second one, labelled Schumpeter Mark II, is proposed in Capitalism, Socialism and Democracy (1942). In this work, inspired by the features of the American industry of the first half of the twentieth century, Schumpeter discussed the relevance of the industrial R&D laboratory for technological innovation and the key role of large firms. According to this view, the pattern of innovative activities is characterised by the prevalence of large established firms and by relevant barriers to entry for new innovators. Large firms have institutionalised the innovation process with the creation of R&D laboratories filled with researchers, technicians and engineers. With their accumulated stock of knowledge in specific technological areas, their advanced competence in large scale R&D projects, production and distribution and their relevant financial resources, they create barriers to entry to new entrepreneurs and small firms.