Pushkinskaya st. 43. office 10
Rostov-on-Don, Russia
e-mail: info@hjournal.ru 
tel. +7(863) 269-88-14

cubsEN (2)

Shumpeterian Growth Theory in the Context of the Innovation-Led Transition of Economies

Shumpeterian Growth Theory in the Context of the Innovation-Led Transition of Economies

Journal of Institutional Studies, , Vol. 11 (no. 2),

The paper explores the Schumpeterian stream in economic growth theories, which associates sustainable growth with an endogenous nature of technological progress and an effective market reallocation of resources to the most productive agents generating radical innovations. The resource reallocation is driven by the micro-level process of creative destruction that displaces less effective firms, technologies, or practices by more productive and innovative ones through the market competition. We highlight two interconnected packages of economic growth policies, deriving from Schumpeterian theory, – firstly, measures stimulating a firm-level innovation activity, and secondly, measures supporting a barrier-free environment for a dynamic inter-firm flow of resources and new technologies. We analyze how creative destruction accelerates a country’s total factor productivity (TFP) and how this positive effect is suppressed (f.e., in China or Russia) by fragmentation of economy, i.e. by large intra-industry gaps in the level of firms’ productivity. The Schumpeterian growth theory helps to explain reasons for the “new normal” situation and the slowdown of TFP in developed economies, as well as the problem of a middle-income trap in developing countries. Special attention is given in this connection to the phenomenon of “zombie-firms”. We present a composite comparative analysis of the existing growth theories (Keynesian, neoclassical, evolutionary, institutional and complexity economics), identifying the place of Schumpeterian theory among them. We assess advantages and limitations of this theory in the context of the up-to-date economic thought and the renewed economic policy approaches.

Keywords: endogenous growth models; creative destruction; economic growth theories; innovation-driven growth; institutional environment; resource reallocation, total factor productivity

  • Acemoglu, D., Akcigit, U., Alp, H., Bloom, N. and Kerr, W. (2018). Innovation, Reallocation, and Growth. American Economic Review, 108(11), 3450–3491.
  • Acemoglu, D., Johnson, S. and Robinson, J. A. (2005). Institutions as a Fundamental Cause of Long-Run Growth // Handbook of Economic Growth. Volume 1 / P. Aghion, S. N. Durlauf (eds.). Amsterdam: North-Holland, pp. 385–472.
  • Adalet McGowan, M., Andrews, D., Millot, V. and Beck, T. (2018). The Walking Dead?: Zombie Firms and Productivity Performance in OECD Countries. Economic Policy, 33(96), 685–736.
  • Adler, G., Duval, R., Furceri, D., Çelik, S. K., Koloskova, K. and Poplawski-Ribeiro, M. (2017). Gone with the Headwinds: Global Productivity. IMF Staff Discussion Note. 17/04.
  • Aghion, P., Akcigit, U. and Howitt, P. (2015). The Schumpeterian Growth Paradigm. Annual Review of Economics, 7(1), 557–575.
  • Aghion, P., Bloom, N., Blundell, R., Griffith, R. and Howitt, P. (2005). Competition and Innovation: An Inverted-U Relationship. Quarterly Journal of Economics, 120(2), 701–728.
  • Aghion, P. and Howitt, P. (1992). A Model of Growth Through Creative Destruction. Econometrica, vol. 60(2), 323–351.
  • Aghion, P. and Howitt, P. (1998). Endogenous Growth Theory. Cambridge, MA: MIT Press.
  • Aghion, P. and Roulet, A. (2014). Growth and the Smart State. Annual Review of Economics, 6(1), 913–926.
  • Akcigit, U. and Kerr, W. R. (2018). Growth through Heterogeneous Innovations. Journal of Political Economy, 126(4), 1374–1443.
  • Alon, T., Berger, D., Dent, R. and Pugsley, B. (2018). Older and slower: The startup deficit’s lasting effects on aggregate productivity growth. Journal of Monetary Economics, 93, 68–85.
  • Al-Suwailem, S. (2011). Behavioural Complexity. Journal of Economic Surveys, 25(3), 481–506.
  • Andrews, D., Criscuolo, C. and Gal, P. N. (2015). Frontier Firms, Technology Diffusion and Public Policy: Micro Evidence from OECD Countries. OECD Productivity Working Papers, no. 2.
  • Banerjee, R. N. and Hofmann, B. (2018). The rise of zombie firms: Сauses and consequences. BIS Quarterly Review, vol. September 2018, pp. 67–78.
  • Bergeaud, A., Lecat, R. and Cette, G. (2017). Total Factor Productivity in Advanced Countries: A Long-Term Perspective. International Productivity Monitor, 32, 6–24.
  • Bessonova, E. V. (2018). Analysis of Russian firms’ TFP growth in 2009-2015. Voprosy Ekonomiki, 7, 96–118.
  • Brandt, L., van Biesebroeck, J. and Zhang, Y. (2012). Creative accounting or creative destruction?: Firm-level productivity growth in Chinese manufacturing. Journal of Development Economics, 97(2), 339–351.
  • Colander, D. C. and Kupers, R. (2016). Complexity and the Art of Public Policy: Solving Society’s Problems from the Bottom Up. Princeton, NJ: Princeton University Press.
  • Decker, R. A., Haltiwanger, J., Jarmin, R. S. and Miranda, J. (2017). Declining Dynamism, Allocative Efficiency, and the Productivity Slowdown. American Economic Review, 107(5), 322–326.
  • Easterly, W. and Levine, R. (2001). It’s Not Factor Accumulation: Stylized Facts and Growth Models. The World Bank Economic Review, 15(2), 177–219.
  • EBRD. (2017). Transition Report 2017–18: Sustaining Growth. London: European Bank for Reconstruction and Development.
  • Eichengreen, B., Park, D. and Shin, K. (2012). When Fast-Growing Economies Slow Down: International Evidence and Implications for China. Asian Economic Papers, 11(1), 42–87.
  • Elsner, W., Heinrich, T. and Schwardt, H. (2014). The Microeconomics of Complex Economies: Evolutionary, Institutional, Neoclassical, and Complexity Perspectives. Amsterdam: Academic Press.
  • Golikova, V. V., Gonchar, K. R., Kuznetsov, B. V. and Yakovlev, A. A. (2007). Russian industry at the crossroads: What hinders our firms from becoming competitive. Moscow: HSE Publishing. (In Russian).
  • Grifell-Tatjé, E., Lovell, C. A. K. and Sickles, R. C. (2018). Overview of Productivity Analysis: History, Issues, and Perspectives // The Oxford Handbook of Productivity Analysis / E. Grifell-Tatjé, C. A. K. Lovell, R. C. Sickles (eds.). Oxford: Oxford University Press, pp. 3–73.
  • Grossman, G. M. and Helpman, E. (1991). Innovation and Growth in the Global Economy. Cambridge, MA: MIT Press.
  • Grover Goswami, A., Medvedev, D. and Olafsen, E. (2018). High-Growth Firms: Facts, Fiction, and Policy Options for Emerging Economies. Washington, DC: The World Bank.
  • Gurvich, E. (2016). Institutional constraints and economic development. Russian Journal of Economics, 2(4), 349–374.
  • Hanusch, H. and Pyka, A. (eds.). (2007). Elgar Companion to Neo-Schumpeterian Economics. Cheltenham: Edward Elgar.
  • He, Q., Li, X. and Zhu, W. (2018). Political Connection and the Walking Dead: Evidence from China’s Privately Owned Firms.
  • Hsieh, C.-T. and Klenow, P. J. (2009). Misallocation and Manufacturing TFP in China and India. Quarterly Journal of Economics, 124(4), 1403–1448.
  • Iwasaki, I., Maurel, M. and Meunier, B. (2016). Firm entry and exit during a crisis period: Evidence from Russian regions. Russian Journal of Economics, 2(2), 162–191.
  • Kirdina-Chandler, S. G. and Maevsky, V. I. (2017). Methodological Issues of the Mesolevel Analysis in Economics. Journal of Institutional Studies, 9(3), 7–23. (In Russian).
  • Kirman, A. (2016). Complexity and Economic Policy: A Paradigm Shift or a Change in Perspective? Journal of Economic Literature, 54(2), 534–572.
  • Lam, W. R., Schipke, A., Tan, Y. and Tan, Z. (2017). Resolving China’s Zombies: Tackling Debt and Raising Productivity. IMF Working Papers. WP/17/266.
  • Malygin, V. E. (2015). Global Value Chains Phenomena: Definition, Forms, Evolution. Bulletin of Institute of Economics, RAS, 6, 113–124. (In Russian).
  • Melitz, M. J. (2003). The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity. Econometrica, 71(6), 1695–1725.
  • Nallari, R. and Griffith, B. (2013). Clusters of Competitiveness. Washington, DC: The World Bank.
  • OECD. (2015). The Future of Productivity. Paris: OECD Publishing.
  • OECD. (2017). Debate the Issues: Complexity and Policy Making. Paris: OECD Publishing.
  • OECD. (2018). The Productivity-Inclusiveness Nexus. Paris: OECD Publishing. 
  • Phillips, F. and Linstone, H. (2016). Key Ideas From a 25-year Collaboration at Technological Forecasting & Social Change. Technological Forecasting and Social Change, 105, 158–166.
  • Polterovich, V. M. (2015). From Social Liberalism towards the Philosophy of Collaboration. Social Sciences and Modernity, 4, 41–64. (In Russian).
  • Porter, M. E., Delgado, M., Ketels, C. H. and Stern, S. (2008). Moving to a New Global Competitiveness Index // The Global Competitiveness Report 2008–2009 / K. Schwab, M. E. Porter (eds.). Geneva: World Economic Forum, pp. 43–63.
  • Romer, P. M. (1990). Endogenous Technological Change. Journal of Political Economy, 98(5), Part 2, S71-S102.
  • Russell, M. G. and Smorodinskaya, N. V. (2018). Leveraging Complexity for Ecosystemic Innovation. Technological Forecasting and Social Change, 136, 114–131.
  • Schumpeter, J. A. (1942). Capitalism, Socialism, and Democracy. New York, NY: Harper & Brothers.
  • Smorodinskaya, N. V. (2015). Globalized Economy: From Hierarchies to a Network Order. Moscow: Institute of Economics, RAS. (In Russian).
  • Smorodinskaya, N. V. and Katukov, D. D. (2017). Dispersed Model of Production and Smart Agenda of National Economic Strategies. Economic Policy, 12(6), 72–101. (In Russian).
  • Smorodinskaya, N. V., Russell, M. G., Katukov, D. D. and Still, K. (2017). Innovation Ecosystems vs. Innovation Systems in Terms of Collaboration and Co-creation of Value. Proceedings of the 50th Hawaii International Conference on System Sciences. (http://hdl.handle.net/10125/41798).
  • Solow, R. M. (1956). A Contribution to the Theory of Economic Growth. Quarterly Journal of Economics, 70(1), 65–94.
  • Syverson, C. (2004). Market Structure and Productivity: A Concrete Example. Journal of Political Economy, 112(6), 1181–1222.
  • Syverson, C. (2017). Challenges to Mismeasurement Explanations for the US Productivity Slowdown. Journal of Economic Perspectives, 31(2), 165–186.
  • Tan, Y., Huang, Y. and Woo, W. T. (2016). Zombie Firms and the Crowding-Out of Private Investment in China. Asian Economic Papers, 15(3), 32–55.
  • Timmer, M. P. and Voskoboynikov, I. B. (2016). Is Mining Fuelling Long-Run Growth in Russia? Industry Productivity Growth Trends in 1995–2012 // The World Economy: Growth or Stagnation? / D. W. Jorgenson, K. Fukao, M. P. Timmer (eds.). Cambridge: Cambridge University Press, 281–318.
  • Wessner, C. W. (2005). Entrepreneurship and the Innovation Ecosystem Policy Lessons from the United States // Local Heroes in the Global Village: Globalization and the New Entrepreneurship Policies / D. B. Audretsch, H. Grimm, C. W. Wessner (eds.). New York, NY: Springer, 67–89.
  • Zamulin, O. A. and Sonin, K. I. (2019). Economic growth: Nobel prize in economic sciences 2018 and the lessons for Russia, 1, 11–36. (In Russian).
Publisher: Ltd. "Humanitarian perspectives"
Founder: Ltd. "Humanitarian perspectives"
Online-ISSN: 2412-6039
ISSN: 2076-6297