Joseph Alois Schumpeter (1883 – 1950) is one of the most well known economists of the XXth century, namely thanks to its work on innovations. One of the theories he develops is the one called creative destruction. So, in our study of the Western growth systems and the role of innovations in this system, we will start with a historical and theoretical analysis, and then develop the importance of Innovation in today's Western economy. Usually, an innovation may be defined as the process of making improvements by introducing something new, or also the successful exploitation of new ideas. In addition, innovations can be innovations of products, services or processes. Also, to differentiate the innovation, from the invention, today's theories tend to consider that the innovation must add value. So, an invention can become an innovation only if someone implements it with success for example to improve efficiency, or productivity in a process, or simply by selling this innovative product or service.
[...] II: The importance of innovation in today's economy (Western economies) Innovations are seen as a driver for growth Today, ideas of Schumpeter are not put into question, and innovation is even becoming a matter of national policy in the western countries. Not only do companies see innovation as a way to achieve sustainable growth, but also countries see it as an opportunity to face international competition. Companies: For Companies, as explains Deloitte & Touche, the consulting firm, companies looking to differentiate themselves and achieve their Super- Growth objectives, need to look for breakthrough and even disruptive opportunities to generate revenues and profits from currently non-existent sources. [...]
[...] So, apparently, Innovation is predominant in the roots for the Industrial Revolution, and thus for growth, and the Theory on innovation, mainly developed by Schumpeter, wouldn't say the opposite. The theory Schumpeter insists on the role of innovations in the impulsion of the economy under the action of entrepreneurs. As a starting point for the development of his theory, Schumpeter considers a static economy, in which he describes (by simplification) the economic life and the relations between the economic agents. This allows him to show that there is a general equilibrium, thanks to the price. This economy is also characterized by the free competition and private property. [...]
[...] Countries: Nowadays, with the development of BRIC countries, it appears for many western states that innovation is the best way to stay competitive in the International environment. As a matter of fact, it's the only solution to keep a competitive advantage in terms of foreign investments and exports. These fast growing countries benefit from a large domestic market, from low cost of labour until now, and also from a phenomenon of rattrapage compared to western economies. As a result, more and more goods, which used to be produced in Western countries and exported all over the world, are now produced in Developing countries. [...]
[...] Conclusion As a conclusion, what we can say is that Innovation seems to play an important role in the growth system of western economies. This was true at the beginning of the Industrial Revolution, where the role of innovations cannot be minimised, and it's also true today. Nevertheless, the economy doesn't simply rely on innovations, and if these are important and seem to be a key element for the future of western economies, the present situation shows that factors such [...]
[...] So, taking the innovation as a starting point, Schumpeter explains the cyclic alternation of growth and depression. To him, innovations are the explanation to cycles in the economy. So, he namely explains the Kondratiev cycles. These, are economic cycles, which last for approximately for 40 to 60 years and are characterized by an ascending phase (phase and a descending phase (phase B). These cycles have first been observed by Nikolaï Kondratiev in 1926. For Schumpeter, these cycles would be the result of major innovations, which will lead to apparition of other innovation, and so innovations appear in grapes. [...]
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