This chapter was first published in A. Pyka and E.S. Andersen (eds.), Long Term Economic Development, Economic Complexity and Evolution, DOI 10.1007/978-3-642-35125-9_19, Springer-Verlag Berlin Heidelberg, 2013.

Abstract

Schumpeter’s descriptive metaphor “creative destruction” has inspired a
great deal of important research. He was clear that the continual transformation
underlying economic growth is an intrinsic feature of the system, but left no clear
causal account of the underlying process. His principal narrative concerned the
entrepreneur, an “agency” explanation rather than a causal one in the usual sense.
However, closer examination reveals that this does not fit with the observed
historical pattern of continuing per capita growth, which is specific to the type of
capitalist economy that has only existed in the past two centuries. He also
introduced a more systemic view, but this is not very well developed in his writings
and the causal mechanism is unclear. Connected with the ambiguity in respect of
causation, Schumpeter was also unclear about the relative roles of large and small
firms in innovation, at times seeing large corporations as the engine of growth, but
at other times seeing them as a threat to the dynamism of the entrepreneur.
Comparison with the historical record shows that neither view well represents the
general process of capitalist transformation.