Joseph Schumpeter: Creative Innovation: The Implications Of Entrepreneurship

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Joseph Schumpeter, an American economist, renowned for his term ‘creative destruction,’ defined ‘entrepreneurs as individuals who exploit market opportunity through technical and/ or organisational innovation.’ Entrepreneur is derived from the French verb ‘entreprendre,’ meaning to undertake and consequently entrepreneurship is the ability and will to develop and manage a business scheme; accompanied by any of its risks with the intention of making turnover. Conversely, innovation is the process of transforming a creation into a product or service that generates value; ‘the commercially successful exploitation of ideas.’ It is integral to any developing economy, particularly in those where prevailing business models have become outmoded. Entrepreneurship…show more content…
Schumpeter’s entrepreneur is the root of disequilibrium and ‘creative destruction,’ and since the new framework makes the long-standing one inappropriate, innovation is not imperative to entrepreneurship. Kirzner, recognised with the Austrian School, argued that anyone is capable of becoming an entrepreneur – all that is essential is wisdom. He branded an entrepreneur as someone who recognises and possesses the alertness to make exploitable gains from trade and benefit from them. Nonetheless, Kirzner understood innovation to be incremental, in which case it was a continuous, recursive process of improving current products. Although, innovation involves modification, innovation is not essential to entrepreneurship as The Austrian School believes attentiveness and knowledge are the real key to economic development. Incremental innovation is a short to medium term process and so does not create lasting value. For instance, Gillette razors began their journey with one blade, now their product has progressed, accumulating unique features and additional blades. The vast difference between Amazon’s Dash Button and Gillette is that greater transformation is present in the Amazon scenario since a novel market forms. Furthermore, once the economy reaches equilibrium there are no exploitable gains to be made since the chance to make substantial profit margins only exists when the economy is ‘out-of equilibrium.’ Innovation is not central to entrepreneurship as reinforced by Kirzner since alert and resourceful entrepreneurs are the real key to innovation and economic development equally, as they exploit on the indecision existing in these fluctuating

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