Schumpeter's Theory Research Articles

A Reformulation of Schumpeter's Theory of Macroeconomic Turbulence

A Reformulation of Schumpeter's Theory of Macroeconomic Turbulence

Types of Ownership and Innovation in Different Institutional Environments

The idea that innovation is an important source of economic growth dates back to the introduction of the Schumpeterian theory of economic development. Ever since, scholars have accumulated stocks of knowledge about determinants of innovation in a number of review papers. Despite the fact that the existing research on innovation has looked into the antecedents, effects, influential moderators and types of innovation, there still remain important gaps that need to be addressed. One important omission refers to the widely held assumption of scholars that innovation is related to risk, due to its inherently risky nature. A systematic review of the existing research on the topic of risk in the field of strategic management, further reveals that very few studies conceptualize the link between the constructs or attempt to study them simultaneously in an empirical setting. Additionally, current work on both risk and innovation analyzes each of these constructs in the context of advanced economies. Because the applicability of fundamental mechanisms and models originating in developed economies to the context of emerging economies has been previously questioned, the understanding of the nature of the relationship between risk and innovation is incomplete without the consideration of the impact of institutional factors. This study addresses several research questions in regard to the intersection between antecedents of innovation, innovation and the institutional environment. I attempt to examine the aforementioned questions in two distinct but related essays. The first essay offers a critical review of the existing research with focus on risk in the field of strategic management. The general findings reveal fragmented scholarship, bound by the context of each discipline with brief sporadic cross-disciplined related studies that fail to advance our understanding and interpretations of the nature of risk. I survey the conceptualizations of risk of 88 relevant papers, published in outlets, consistently recognized as top journals in management, finance, and management related disciplines, in an effort to synthesize prior research efforts and identify common themes and patterns of variation. Reviewing the existing stock of knowledge from 2006 until 2013, this study finds three types of risk conceptualizations (external or exogenous risk, internal or endogenous risk and within individual risk or endowment) and two ontologies (socially constructed and realistic) are dominant in the literature. In order to organize prior work into an integrative and coherent body of research, I propose a type of risk conceptualization - type of ontology framework that can map out and link various antecedents, dimensions and outcomes of risk and facilitate future research efforts, aimed at better understanding of the nature of risk as well as identifying fundamental research questions that remain unanswered. Within the review on risk as a subset of studies I further focus on the literature on risk and innovation in an effort to evaluate and assess the…

Розвиток інноваційної діяльності у знаннєвому трикутнику "держава - університети - промисловість"

Article presents the methodological and analytical generalization of the modern practices of the institutional ensuring of the organic cooperation in frame of innovation cycle by the government, Universities and industries. The "Triple Helix" innovation mode is considered in order to undertake the international comparative analysis of Ukraine's competitiveness according to appropriate indicators. Author proposes to improve the Ukrainian current innovation policy through the creation and supporting the special institutional measures regarding to enhancing the interaction between the government, Universities and businesses. The core of the proposed conceptual model is the Schumpeterian theory of economic development and its policy implications in the economically successful countries which have become such because they constantly generate new commercialized knowledge in the forms of process and product innovations. Therefore, dynamic and successful countries consider the transformation of institutions that promote the development of knowledge and innovation potential among the immediate reform measures. It concerns the reform of the institutions of education and science, infrastructure of transfer of innovative technologies, supporting of innovation in all areas of life, providing a major international integration of the country to the world educational, scientific and innovative ecosystem. In order to realize such approach, the developed countries have transformed the forms and methods of innovation policy by building the new effective managerial and organizational conditions to activate the processes of generating and commercializing innovations through changing their innovation mode: from the "linear" model of innovation cycle to the "cooperative" one, i.e. to the "Triple Helix" mode. These methodological and practical transformations have changed radically the role and significance of the forms of interaction between institutions of science, education and business in the innovation process and have raised the role of Universities. This led to the formation of a new type of university - Entrepreneurial University. It is important to create in Ukraine a special institutional background to build a "cooperative" model innovation cycle, to develop and adopt regulations that will promote processes of self-organization in the area of innovation cooperation of research institutions and universities on the one hand, and business and government agencies - on the other. In this context the problem of greater autonomy for universities becomes very urgent. Also, this autonomy can help ensure a greater diversification of the sources of funding (through commercial relations with businesses and government agencies under innovation cycle) and to become more flexible and mobile in answering the challenges of external market environment.

Schumpeter's entrepreneurs in the 20th century: The Tucker automobile

The purpose of this paper is to analyze Schumpeter's concept of entrepreneurship applied to the example of Preston Tucker, the American automobile designer who conceived the Tucker 48, which was briefly produced in Chicago in the late 1940s.Despite this paper addresses the first attempts of economics to comprehend and explain the role of the entrepreneur, it will focus primarily on the theoretical approaches on entrepreneurship and economic innovation developed by Joseph Schumpeter in the beginning of the 20th century.Moreover, the paper will analyze a particular example of such entrepreneurship by understanding how innovative industrial concepts and ideas may lead to a destructive creative process, which ultimately may result in new industries and businesses.Finally, taking Tucker's example as a benchmark the paper explores Schumpeter's theories regarding the role of the entrepreneur in disturbing the monotonous flows of the markets.

"Schumpeter's Theory of Business Ideas: ""Incorporating"" Opportunity Creation and Discovery"

Management scholars have long separated the study of opportunity creation and discovery, assuming that the nature of opportunities itself is not affected by information acquisition. Research on jud...

Sector size, technical change and stability in the USA (1957-2006): a Schumpeterian approach

Purpose– The purpose of this paper is to investigate two famous postulates of the Schumpeterian doctrine and its implications for the US economy.Design/methodology/approach– Analytically, the authors investigate whether sector size matters for sectoral: technological change and stability, as expressed through the relevant quantitative measures and variables. To this end, the authors test a number of relevant models that express the various forms of this relationship. More precisely, the authors use panel data for the 14 main sectors of economic activity in the USA over the period 1957-2006, just before the first signs of the US and global recession made their appearance.Findings– The results seem to be in line with the Schumpeterian postulate that market size matters for technological change and economic stability, for the US economy (1957-2006). Clearly, further research would be of great interest.Originality/value– This work contributes to the literature in the following ways: first, it provides an extensive review of the literature on the subject and adopts two relevant methodological approaches. Second, based on these quantitative approaches, the paper offers a complete investigation of two famous postulates of the Schumpeterian theory for the US economy, and it is the first, to the best of the authors’ knowledge, to do so by sector of economic activity, in a panel data framework. Third, the paper uses a wide data set (1957-2006) to examine the US economy up until the first signs of the US and global economic recession made their appearance.

Preference Formation, Choice Sets, and the Creative Destruction of Preferences

Abstract Economic models are founded in the idea of taking individuals' preferences as both known and given. This article explores the evolution of personal preferences, within a context of both entrepreneurial discovery and Objectivist philosophy. It begins by formalizing Ayn Rand's theory of Objectivism applied to human values, and continues by modeling preference changes similar to Schumpeter's theory of creative destruction—a process of self-discovery. Next the role of societal factors is examined in forming shared preference sets. Finally, the article describes how the strength of human preferences is used to narrow choice sets in the presence of greater consumption options.

Schumpeter’s theological roots? Harnack and the origins of creative destruction.

This short research note highlights the similarity between Schumpeter's theory of creative destruction and the work of his contemporary, the German theologian Adolf von Harnack (1851-1930). The note provides a brief over-view of Harnack's concepts and terminology and highlights their similarity to Schumpeterian ideas about routinisation, charismatic entrepreneurial leadership, and creative destruction. While the evidence is far from conclusive it does suggest that the similarity merits closer attention that could potentially lead to changes to the received understanding of the theory of creative destruction. In particular, it suggests a need to potentially reassess the position of Schumpeter within a wider Weberian tradition.

Schumpeter's theory of self-restoration: a casualty of Samuelson's Whig historiography of science

This article argues that Samuelson’s influential 1987 call for a ‘Whig history of economic science’ rests on a Whig historiography of the natural sciences. This contrasts with how science actually works: Samuelson neglects the critical role of controversy in the development of knowledge, leading to the misleading idea that scientists pursue discovery at the expense of reflection on the foundation and history of their subject. The consequence is institutional delegitimation: the exclusion of legitimate contrary hypotheses when economists test their theories, invalidating the test. Samuelson further confuses the history of ideas with the history of texts. This expands the scope of institutional delegitimation to a systematic misrepresentation of the actual ideas at stake in the economic controversies, erecting a permanent obstacle to the discovery of truth. I illustrate this with Samuelson’s exclusion from consideration of two ‘non-ignorable’ contributions to macroeconomic theory: Schumpeter’s Business Cycles, which he failed to recognise as a theory of endogenous capitalist self-restoration, and the concept of endogenous decline, excluded by his Whig reinterpretation of Marx’s theory of value. Schumpeter and Marx offered opposed, but legitimate, alternatives to the post-war macroeconomic consensus of which Samuelson was a major architect. In particular, both recognised that deep and prolonged crises were a natural product of capitalism, not an inexplicable exception. To respond to the 2008 downturn, economics needs to reopen a wide discussion without excluding, a priori, any of these opposed theoretical explanations, instead seeking to understand clearly what each of them actually says and testing them against the empirical evidence of history.

Unveiling the dynamic relation between R&D and emission abatement: National and sectoral innovation perspectives from the EU

This paper examines investment decisions regarding innovation and emissions abatement in a dynamic framework, where knowledge stock is an impure public good. We take a sector perspective based on neo Schumpeterian theory that emphasises the role of both sector and innovation systems. We interpret results taking into account sector and country based institutional, market and policy conditions. Econometric outcomes, based on an original sector dataset which exploits the NAMEA source for 15 European Union (EU) countries and 23 manufacturing sectors in the time frame 1995–2006, show that innovation efforts are positively correlated to various spillover effects. Those effects include the emissions abatement of the other sectors, thus pointing out the relevance of forces which opposite typical free riding behaviour in public or mixed public good frameworks. Different reactivity strengths for different global and local emissions also allow us to disclose the specific role of technological and economic complementarity. When considering CO2 emissions, innovation is mainly triggered by national interactions, a fact which is coherent with a dominance of national innovation and policy systems in the EU. The result is also consistent with the fact that CO2 abatement technologies heavily regard energy efficiency that provides joint private and public benefits. The fact that NMVOC abatement efforts by other sectors from abroad impact R&D investments positively means that, in some cases, a realm of sectoral systems of innovation is also relevant. The different evidence between local and global externalities is surely explained not only by the different technological and economic contents, but also by the fact that the EU has witnessed different policy implementation.

The ‘Rise of the Rest’: Schumpeter's Theory of Creative Destruction in the Age of Digital Media

The advent of ICT brought about a process of industrial mutation that, clubbed with the recent economic turmoil, has seen markets, businesses and managements focus on mobility, ubiquity and entrepreneurial innovation as survival strategies. This paper analyses the fall of the media moghuls against the rise of the twitteratti; it argues that we are at the edge of a blast wave of consumer-driven change, one that is tight on performance but loose on tactics; it focuses on the paradox of digital convergence on the one hand and content diversity on the other. How can we best define the role of mediated communication in its multiple technological avatars? Is it becoming a God of Small Things, particularly where social justice is concerned? Or is it just another instance of cultural imperialism? Is it confirming or challenging the public service orientation of the media? Is it creating tipping points that shift relationships among social, financial, and political systems? Or is it becoming a Tower of Babel in the name of alternative voices and discourses? - are the other specifics addressed. Given the global interconnectedness of media today, the paper primarily seeks to take Schumpeter's theory of Creative Destruction out of the purview of economics alone and link it to the larger issue of change as the new constant for our next evolutionary leap- as cyborgs.

Issues and Challenges, Strategies and Recommendations, in the development of ICT in a small island developing state: the case of Samoa

AbstractThis paper is based on a study whose goals were to i) trace and analyse the developments of ICT in Samoa over the last 20 years, ii) identify issues and challenges in implementing these ICT developments iii) identify past and present strategies employed to resolve them and iv) from these findings make recommendations for the future in terms of policy implications, best practices and research. The conceptualisation of ICT developments, issues, challenges and strategies are based on Heeks’ Inclusive Innovation theory (Heeks, 2013), Schumpeter's development theory (2002) and Sen's capability approach (1999). Analysis of ICT developments makes use of the World Bank Infodev framework for assessing ICT projects (World Bank, 2005). Analysis, reporting and discussion of the findings are made within the Framework of Action in ICT development in the Pacific (FAIDP, 2010). From this investigation of issues and strategies, recommendations have emerged for best practice and areas for potential research.

Evidence on Creative Destruction: Small Business Creation and Unemployment

This paper provides novel empirical evidence supporting Schumpeter's Theory of Creative Destruction. Earlier research has established the role of technological shocks, cycles and disruptive innovation in facilitating individual firm survival and destruction but few studies have isolated causal mechanisms of such economic renewal. The first contribution of this paper is to demonstrate one such mechanism that drives the process of creative destruction. I illustrate that a negative economic shock, characterized by an increase in state-year level of unemployment creates a sharp wage drop for high-ability Black individuals relative to Whites, and changes the payoff from employment relative to entrepreneurship. This creates an incentive for the high-ability Blacks to become entrepreneurs. Thus the destruction from economic downturns is accompanied by a simultaneous process of creation through the establishment of small ventures by Black individuals with high human capital. The second contribution of this paper is to present evidence on the quality of ventures created. I show that these ventures do not opportunistically disappear as soon as the downturn is over, but prove to be of average quality and are economically meaningful assets.

Time scales and mechanisms of economic cycles: a review of theories of long waves

This paper explores long wave theory, including Kondratieff's theory of cycles in production and relative prices; Kuznets's theory of cycles arising from infrastructure investments; Schumpeter's theory of cycles due to waves of technological innovation; Goodwin's theory of cyclical growth based on employment and wage share dynamics; Keynes–Kaldor–Kalecki's demand and investment-oriented theories of cycles; and Minsky's financial instability hypothesis whereby capitalist economies show a genetic propensity to boom–bust cycles. This literature has been out of favor for many years but recent developments suggest a re-examination is warranted and timely.

A Schumpeterian analysis of the credit market

Schumpeter shows that bank credit acts as money-capital and, therefore, constitutes the necessary premise for the realization of the innovative processes planned by entrepreneurs. This makes it important to specify the debt contracts between each bank and entrepreneurs during the prosperity phase of Schumpeter's cyclical development. The present paper aims to point out the achievements and the limits of Schumpeter's monetary theory with respect to this point, that is the debt contract design. On the side of the limits, I maintain that Schumpeter's approach, although representing one of the most stimulating contributions in the history of economic analysis, asks for refinements as regard to the objective-function of the individual banks, the determination of the interest rates, and the usableness of the credit demand and supply curves. Schumpeter's posthumous treatise on money provides stimulating insights for the definition of these refinements.

Schumpeter's institution of money: Slipping off the border of economic theory and landing in economic sociology

In contrast with Schumpeter's theory of credit and banking, expounded in definitive form in The Theory of Economic Development, his theory of money took on successive forms over the years, starting with an attempt at its integration within the general equilibrium framework, and gradually assuming institutional traits, most notably in his posthumously published manuscript, The Theory of Money and Banking. This paper traces this evolution and explores the difficulties met when attempting to delimit the disciplinal field to which Schumpeter's ‘science of money’ pertains.

Empresa e instituições na teoria schumpeteriana: influências do ambiente social sobre a inovação e o progresso tecnológico.

Este artigo analisa a influência da relação entre instituições e capital social no processo de inovação da empresa na teoria Schumpeteriana. A empresa inovadora necessita desenvolver competências e habilidades para lidar com a inovação, absorvendo conhecimento e interagindo com o ambiente. Tal ambiente ultrapassa a fronteira do mercado e se transforma em um fator social, denominado por Nelson e Sampat (2001) de tecnologia social. Este artigo busca contribuir com a aproximação da teoria econômica Schumpeteriana da inovação com a Sociologia Econômica.

J. A. Schumpeter (1908) and Money: Acting as Go-Between?

This paper examines J.A. Schumpeter's theory of money, as expounded in his first book, Das Wesen und der Hauptinhalt der theoretischen Nationalokonomie (The Essence and Main Contents of Theoretical Economics), published in 1908. The book, which offers a presentation of the static analysis of general equilibrium, sparked excitement among the young economists in the German language area, well beyond World War I, leading Schumpeter to act as a link between Walras and the German-speaking world. Interestingly, the book contains one of the first attempts at integrating money into the general equilibrium theory. From this point of view, it would seem that Schumpeter followed in the footsteps of Walras, rather than in Menger's. In fact, his contribution, while inconclusive, is of his own design. In any case, this attempt remains isolated, as Schumpeter will not trod the same path again in his later writings on the theory of money, credit and banking.

Social entrepreneurship theory and sustainable social impact

PurposeThe purpose of this research is to introduce a theory for social entrepreneurship based on integrating the entrepreneurship literature with a global empirical research carried out on social entrepreneurs using grounded theory. Theoretical contributions and insights from the social entrepreneurship literature are integrated into the research.Design/methodology/approachThis research is an exploratory inductive qualitative research based on the grounded theory methodology developed by Glaser and Strauss, and procedures developed by Strauss and Corbin with a constructivist stance.FindingsThe behavioral theory of social entrepreneurship studies the contextual factors that lead to social venture creation, the underlying organization dynamics and structures, and how these typologies measure social impact, mobilize resources, and bring about sustainable social change.Research limitations/implicationsThe result of the research is a behavioral theory for social entrepreneurship, which introduces new organizational typologies that create, measure, and sustain social change. Studying the underlying motivations and conditions upon which social enterprises evolve will help in extending the research on management of social outcomes and impacts. As the focus of the different typologies of social enterprises is to produce measurable social impact, researching these types of social organizations will advance research in social sciences.Practical implicationsStudying the phenomena of social entrepreneurship and explaining the social enterprises' unique behaviors, characteristics, and typologies will advance research for creating sustainable public wealth rather than just focusing on private wealth and business performance. While Schumpeter's entrepreneurship theory led the literature on economic growth, social entrepreneurship theory might be a factor for social development through economically sustainable and viable models.Social implicationsThis research will help in studying the role of social entrepreneurs in creating new social institutions and structures, promoting social movements, and mobilizing resources to create sustainable social impact.Originality/valueThis research is an attempt to contribute to the social entrepreneurship literature by providing new insights about social entrepreneurship behavior. The result of the research is a behavioral theory for social entrepreneurship, which introduces new organizational typologies that create, measure, and sustain social change.

The Change in post 1980 Economic Development and Innovation Studies towards Evolutionary Economics

The role of innovation in economic growth is perceived differently by the different schools of thought. The neoclassical theories emphasise equilibrium in the economy and cannot explain the role of innovation, because the effect of innovation is actually a disturbance of equilibrium. Schumpeter (1961) has shown that growth and development can only take place if the economy is constantly disturbed to an out-of-equilibrium phase. In some of the later neoclassical theories, innovation was considered as a factor that causes growth, but was treated as an exogenous factor. The “new growth theories” were developed later, including innovation as an endogenous factor, but these theories were still based on the equilibrium principle. In the Schumpeterian and neoSchumpeterian theories, innovation is treated as endogenous to the economy. Schumpeter had not been acknowledged as a mainstream economist during the time that he developed and first published his theory. It was not until the 1980s that economists started paying attention to his works and to the importance of innovation in development. The aim of this article is to determine how the studies since 1980 have changed regarding their foundation in the different schools of thought. A methodological and theoretical review is conducted of post 1980 empirical studies that determined the relationship between innovation and economic development. It was found that many empirical studies still make use of neoclassical equilibrium models and that the studies that consider the complexity of the innovation system are not yet sufficiently developed to explain the relationship between innovation and economic development.