Schumpeter’s Creative Destruction: A Review of the Evidence

Leapfrogging innovation competition through the process of creative destruction encourages the innovation in product and process that lengthens and improves lives. Schumpeter’s process of creative destruction emphasizes dynamic innovation competition, as contrasted with the standard model of static price competition. The ‘big-is-better’ account of creative destruction claimed, in addition, that monopolies were the most fruitful source of new leapfrogging innovation. The new ‘small-isbetter’ account claims that small, non-incumbent firms are often the most fruitful source of new leapfrogging innovation. I examine the growing evidence that innovation competition is important, and more likely to be carried out by small, non-incumbent firms. JEL codes: O30 Technological Change, General.