Schumpeter Innovation

Schumpeter argued that innovation was the main cause of economic development, and also of disequilibrium in the economic system.  He credited entrepreneurs with the main responsibility for innovations, which enabled them to perform new, more productive processes. He also distinguished the difference between economic leadership of an innovation and creativity on an invention. Thus most inventors lack the leadership to create a new path towards a particular market, and most innovations don’t require inventions.

Innovation cannot only be driven by individual firms, but requires the coordination of many different firms across the industry. Basic science is necessary for economic and social progress. Almost all innovation starts with some form of basic science with research programs required to expand past basic knowledge. Funding for these research programs is crucial for the innovation process. Many investors and financiers promoted innovation by assuming the risk of creating new monetary resources to finance innovation. Thus innovation systems are not only firms and R&D organizations, but also government agencies and policies, universities and other training organizations, and credit organizations.

 

M.R.

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