Innovation management

1 1. Schumpeter is considered as one of the pioneers who recognized the importance of innovation for understanding the dynamics of wealth creation. Can you briefly describe some of his main ideas? Do you consider them still relevant today? Argue why (not) and/or to what extent.
As one of the first economist in the 20th century, Schumpeter attempted to assign a more central role to technical innovation. During his life, he has had a ‘shift in thinking’. His first vision was the theory of ‘heroic entrepreneurship’ (the ‘young’ Schumpeter). Later he acknowledged the fact that established firms play a big role in the innovation process (the ‘old’ one). I will explain some of his main ideas of these two periods.
2 In his first period, Schumpeter gives a central role to the entrepreneur. He postulates two types of agents: exceptional individuals (entrepreneurs) and imitators. The first ones are willing to face all the hazards and difficulties of innovation as ‘an act of will’. Business entrepreneurs often have strong beliefs about a market opportunity and are willing to accept a high level of personal, professional or financial risk to pursue that opportunity. According to Schumpeter, entrepreneurs are economists. He made a distinction between an inventor and an innovator. An inventor is one who discovers new methods and new materials, and an innovator utilizes inventions and discoveries in order to make new combinations. Inventors do not come up with the most brilliant novelties but are people who know how to manage them. Inventing is thus different from undertaking. But the entrepreneur plays a central role because he is the one who can convert an innovation into profits. This is a better way of competing than via the price according to Schumpeter. The imitators are a second group, who are much more numerous. They are...

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