Scribd
Upload
29 views3 pages

Economic Development

Joseph Schumpeter developed the innovation theory of economic development which asserts that successful innovations can yield economic profits for entrepreneurs. Schumpeter defined innovation as the introduction of new products, production methods, markets, materials, or organizations. He argued that innovation is the driving force of economic growth and development, describing it as a process of "creative destruction" that transforms economies over time. Technological innovation, especially in information technology, has significantly impacted businesses and the wider economy by changing how goods and services are produced and marketed.

Uploaded by

Aubrey Mae Dela Cruz
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
29 views3 pages

Economic Development

Joseph Schumpeter developed the innovation theory of economic development which asserts that successful innovations can yield economic profits for entrepreneurs. Schumpeter defined innovation as the introduction of new products, production methods, markets, materials, or organizations. He argued that innovation is the driving force of economic growth and development, describing it as a process of "creative destruction" that transforms economies over time. Technological innovation, especially in information technology, has significantly impacted businesses and the wider economy by changing how goods and services are produced and marketed.

Uploaded by

Aubrey Mae Dela Cruz
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 3

Economic

Development
Innovation Theory by Joseph
Schumpter

Innovation is the introduction of contemporary ideologies, methods or process, and


creation of new devices. The innovation theory that is coined by Joseph Schumpter
which asserts that the emergence of successful inventions can yield an
entrepreneur economic profits. The innovation theory of profit asserts that an
entrepreneur's principal purpose is to postulate innovations, and that profit is
accorded in the form of a reward for his efforts. Additionally, in the early twentieth
century, Joseph Schumpeter sought to theorize about the features and patterns of
innovation, conceptualizing it as a process that resulted in at least one of the
following five results; the launched of a new product, creation of a new market,
initiation of a new way of production, the discovery of a new source of raw
materials or moderately commodities, and the installation of a new organizational
structure (Schumpeter, 1934). As stated by Schumpeter, innovation is any new
agreement used by an entrepreneur in order to lower overall production costs or
generate demand for his products. Moreover, innovation can be categorized into
two types: the first constitutes all actions that reduce overall production costs, such
as the establishment of a new method or technique of production, the creation of
new technology, novel techniques of industry organization, and so on. All
developments that significantly improve demand for a product fall under the
second category of innovation. Such as the newly launched commodity or high-
quality goods, the emergence or opening of a new market, the discovery of new
raw material sources, the formation of a new product variety or design, and so on.
According to Schumpeter (1942), innovation is a sort of 'creative destruction,' in
which something new emerges from the relics of something old. He argued that
innovation was the lifeblood of capitalism. Moreover, Schumpeter considered
innovation to be a fundamental aspect of economic reform. He came to the
conclusion that economic development is driven by innovation, entrepreneurship,
and market forces. Indeed, innovation is one of the major players in economic
development and growth.

Innovation is the ability to see change as an


opportunity— not a threat.
Steve Jobs
Economic
Development
Innovation Example

Consumers, enterprises, and the economy as a


whole profit from innovation, which is a key
engine of economic advancement. In
economic terms, innovation has led to the
creation and implementation of new ideas
and technologies that improve goods and
services or increase the efficiency of their
production. Innovation in the economy is best
exemplified by technological innovation
particularly in information technology. It has
significantly changed the way businesses
produce and sell their goods and services, as
well as opening up new markets and business
models. Information technology has indeed
impacted our economy vastly in ways that it
enables entities to market their brands,
product, and disseminate information
worldwide about the usage and purpose of
the goods, product, or service that the entity is
selling. Entirely, the innovation in terms of
information technology has only not been
useful in the business industry but also in the
media and news outlet which provides vast
opportunities to make factual information be
known to most of us.

Innovation is the ability to see change as an


opportunity— not a threat.
Steve Jobs
References:

What is Schumpeter’s Innovation Theory of Profit? definition and meaning.


(2016, July 9). Business Jargons. Retrieved February 9, 2022, from
https://businessjargons.com/schumpeters-innovation-theory-of-
profit.html

Who Is Joseph Schumpeter? (2022, January 30). Investopedia. Retrieved


February 9, 2022, from https://www.investopedia.com/terms/j/joseph-
schumpeter.asp#:%7E:text=Schumpeter%20believed%20that%20the%20
was,increases%20the%20demand%20for%20products.

Schumpeter - an overview | ScienceDirect Topics. (n.d.). Sciencedirect.


Retrieved February 9, 2022, from
https://www.sciencedirect.com/topics/engineering/schumpeter

Corporate Finance Institute. (2021, January 30). Joseph Schumpeter.


Retrieved February 9, 2022, from
https://corporatefinanceinstitute.com/resources/knowledge/economic
s/joseph-schumpeter/

European Central Bank. (2021, November 18). How does innovation lead
to growth? Retrieved February 9, 2022, from
https://www.ecb.europa.eu/ecb/educational/explainers/tell-me-
more/html/growth.en.html#:%7E:text=In%20economic%20terms%2C%20i
nnovation%20describes,technology%20in%20the%2018th%20century.

Innovation is the ability to see change as an


opportunity— not a threat.
Steve Jobs

You might also like