Volume 44, Number 174,
July-September 2013
Schumpeter and the Post-Schumpeterians:
Old and New Dimensions of Analysis
Gabriel Yoguel, Florencia Barletta
and Mariano Pereira
Spreading Innovation and the Role of the Market

Various authors have reclaimed and reformulated Schumpeterian ideas on the process of spreading, adopting and selecting innovations. Fagerberg (2003) highlights two important points of divergence: i) strong parallels with evolutionary biology and ii) a more gradual point of view of the development process.

The first simulation models (Nelson and Winter, 1982) proposed that companies introduce innovation in the market to obtain quasi-rents and grow at an above average speed. The non-linear nature and complexity of the equation system used to describe the behavior of firms and technological change makes it difficult to find a solution, which requires the use of agent-based models. In these models, built on Markov chains, although the initial position of participants is key, system dynamics and the relative positions of each firm during the time period under consideration are also important. The evolutionary process of a company is described by its capital capacity and routines. This state determines the short-term behavior of the firm in t+1, their amount of capital and new routines, which is compared against the behavior of the rest of the firms. This is a Schumpeterian competition process that produces winners and losers. While some firms take advantage of technological opportunities with greater success and increase their market share, others leave the system. In keeping with Schumpeter’s ideas (csd), the competitive process leads to stronger concentration, as companies with greater quasi-rents are more able to invest in r+dand increase their productivity.

The authors recognize that in these exercises, the systemic components are only weakly incorporated, while technological economies of scale, entry conditions, the specific nature of the sectors, chances for product differentiation and differing speeds of innovation are not taken into account. The conclusion of their book calls for future studies on modeling the Schumpeterian competition process to explicitly include the specific nature of the sectors linked to technological regimes and company strategies with different degrees of opportunities for innovation to occur. Malerba and Orsenigo (1997) built on these ideas, breaking with the concepts Schumpeter developed in the ted and csd. These differences were formalized by taking into account the predominant market structure, the types of agents generating new combinations, the temporary or permanent nature of quasi-rents and the differences between sectors. They propose a conceptual scheme to identify the predominant features of competition in different productive activities centered on the idea of the technological regime, encompassing diverse dimensions: the conditions to appropriate or take advantage of a technology opportunity, the degree of knowledge accumulation required and the characteristics of the required knowledge base.16 In this way, Schumpeter’s ideas in the ted are associated with a technological regime known as Mark 1, characterized by high opportunity, low accumulation and low appropriability. They believe that csd represents a Mark II technological regime of low opportunity, high accumulation and appropriability. In keeping with Schumpeter’s cyclical economic perspective, Malerba and Orsenigo maintain that the pattern of Mark I innovation activities can be transformed into Mark II. This means that in nascent industry — with low entry barriers, a high level of uncertainty and rapid technological advancement — new companies are the protagonists in the innovation process. When mature industry and technological change follow well-defined paths, they generate growing returns of scale and entry barriers that create monopolistic companies with the power to direct the next innovation process. However, as Schumpeter points out, these companies must continue to innovate because even they are not exempt from the threat of new players.

Langlois (2007) diverges from the idea of two Schumpeters and maintains that there is no break in his thinking. The tension found in Schumpeter’s works between praising the entrepreneur in the ted and the obsolete role of the entrepreneur when r+dactivities are internalized is apparent because this obsolescence has been proposed since the 1920s (Becker and Knudsen, 2003). Still, the role of the entrepreneur once again gains importance two decades later in the creh.

Metcalfe (2010), inspired by the ideas Schumpeter proposed in the ted, conceives of evolutionary competition as a process of structural change generated from the continuous change in company market share, derived from human creativity and an institutional framework with an open economy and the emergence of novel factors. For Metcalfe, the market structure models the competition process by coordinating the heterogeneous behavior of rival firms. It also modifies the market structure, giving rise to feedback mechanisms between these two elements. Competition constitutes a continuous process that uses energy, achieved through the co-existence of rival firms that sell different products and use different production and organizational methods. But the effect of the competitive process is to destroy this economic state, because production is concentrated in the companies that best adapt, and as such, have the strongest growth rates. This dissipative process is implicit in the development phase of the ted where the variety of supply increases at the beginning with the rise of new firms and falls afterwards as a result of market selection. It also gives rise to evolutionary approaches to competition. Metcalfe, for example, replaces Schumpeter’s notions of equilibrium and instability with “order” and “disorder,” proposing the paradox in which Marshall was also engaged. The system must exhibit order — that is, there must be a pattern of dependence among economic agents — and this depends on the rules of the game.17 But order is not equilibrium. Rather, it is coherence, and a coherent structure must be open to the invasion of novel factors. Consequently, Schumpeterian order is unstable in a stable system of rules that organize it. In this sense, Metcalfe suggests that this was already present in the idea of “development from within” proposed by Schumpeter, when he wrote that innovations are fluctuations that continuously send the economy down unforeseen paths. This is not merely an unpredictable process. Rather, each reset of the price and supply structure is a new opportunity for entrepreneurs with different beliefs to challenge the existing order. An endless sequence of stimulus and response provides the rules of the game that regulate an open system.

16 Accumulation refers to the fact that innovative firms are in a better position to be innovative again in the future as compared to those that do not innovate. Appropriability alludes to protecting innovations from copying or imitation and ensuring the benefits derived from these activities. Opportunity describes whether or not there are incentives to favor developing innovations. Finally, the knowledge base is the nature, specificity and relevance of knowledge required to develop innovations.

17 The inter-dependence between order and disorder makes clear the limits of the market as the only institution to coordinate economic activity. This gives rise to the emergence of dynamic networks that are in a continuous process of reconfiguration in order for exchanges to occur.

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PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 49, Number 194 July-September 2018 is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
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