Essays in Honour of Horst Hanusch
Edited by Andreas Pyka, Uwe Cantner, Alfred Greiner and Thomas Kuhn
Chapter 1: Competition in Innovation
1. Competition in innovation Uwe Cantner December 5, 1985, 11 am, University of Augsburg, Memmingerstrasse 14, 5th floor P(rofessor): Organizing our conference next year, we need to have a list of economists related to the research field of Joseph Alois Schumpeter! S(tudent): Schumpeter? Never heard of him! P: Never heard of him? He was one of the most interesting economists ever. S: Never heard about him in my classes – not even in my classes on the history of economic thought. P: Innovation as the major force in market competition and economic dynamics, that’s the topic Schumpeter pushed – a field with high potential for further research. Schumpeter’s era is to come – you’ll see. (Professor: Horst Hanusch; Student: Uwe Cantner) 1. INTRODUCTION Joseph Alois Schumpeter made prominent the notion of competition in innovation by highlighting the fact that entrepreneurs introduce new combinations into the economic system (Schumpeter, 1912) and thereby destroy old structures. The notion of ‘creative destruction’ (Schumpeter, 1942) quite nicely describes this relationship of competition between the new and the old. With this approach in mind, market competition can be seen as a mechanism that drives this competition. Thus markets can be interpreted as a mechanism that continuously evaluates different, competing solutions to a problem (new products, new ways of production and consumption etc.) and this comparative evaluation leads to differential rewards (in the sense of profits, market shares etc.). Thus, if the market process works sufficiently well, firms with above-average performance levels (high productivity growth rates) are...
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