Historical Origins
If Adam Smith is the patron saint of classical economics and Keynes of Keynesian economics, it is Joseph Schumpeter who is the patron saint of innovation economics, especially with his classic 1942 book Capitalism, Socialism and Democracy. Writing around the same time as Keynes, Schumpeter had a decidedly different take on the economy and on economics. For Schumpeter it was evolving institutions, entrepreneurs, and technological change that were at the heart of economic growth. He argued that creative destruction is crucial in capitalism.
But it is only within the last 15 years that a theory and narrative of economic growth focused on innovation that was grounded in Schumpeter’s ideas has emerged. Innovation economics attempted to answer the fundamental problem in the puzzle of total factor productivity growth. Continual growth of output could no longer be explained only in increase of inputs used in the production process as understood in industrialization. Hence, innovation economics focused on a theory of economic creativity that would impact the theory of the firm and organization decision-making. Hovering between heterodox economics that emphasized the fragility of conventional assumptions and orthodox economics that ignored the fragility of such assumptions, innovation economics aims for joint didactics between the two. As such, it enlarges the Schumpeterian analyses of new technological system by incorporating new ideas of information and communication technology in the global economy.
Indeed, a new theory and narrative of economic growth focused on innovation has emerged in the last decade. Innovation economics emerges on the wage of other schools of thoughts in economics, including new institutional economics, new growth theory, endogenous growth theory, evolutionary economics, neo-Schumpeterian economics—provides an economic framework that explains and helps support growth in today’s knowledge economy.
Leading theorists of innovation economics include both formal economists, as well as management theorists, technology policy experts, and others. These include Paul Romer, Elhanan Helpman, W. Brian Arthur, Robert Axtell, Eric Beinhocker, Richard R. Nelson, Richard Lipsey, Michael Porter, Christopher Freeman.
Read more about this topic: Innovation Economics
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