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Schumpeter

Creative Destruction

QuestionAnswer
Schumpeter Adaptive response When a sector or industry simply adapts to a change in the expected manor. e.g. A population increase is met with an increase in the current workforce, or whenever an industry reacts to a protective duty simply by expanding its existing practice.
First Criteria Only Post ex NOT ex ante, it cannot be understood by applying ordinary rules of interference.
Second Criteria A creative response shapes the entire course of history, once it is in effect there is no bridge to a world where it did not happen
The frequency of which it occurs has something to do with: 1. Quality of personnel in society 2. Quality of people available to a specific field or industry 3. The decisions, actions and patterns of behavior of individuals
Defining Characteristics of Entrepreneur A person doing something new or an old thing done in a new way. It does not need to be spectacular or of historic importance.
Difference between Entrepreneur and inventor: Inventor, produces ideas but does not necessarily commercialize them. The Entrepreneur, Gets things done and commercializes ideas.
Importance of Getting things done. Schumpeter argues that it is a defining characteristic of Capitalist history, that Entrepreneurs face the uncertainty and risk of innovation. And if we didn't have this economic development would be linear and not clustered as it is today.
The effect of creative destruction on organizations: The need to adapt to a new paradigm has caused changes in company structure and form. 1. Medival - trading Company 2. Chartered companies 3. Partnerships 4. Corporations
New distinctions of companies: 1. Introducing "new" commodities 2. New technologies in production of commodities 3. New commercial combinations 4. enterprises that reorganize industries e.g. making a monopoly of it.
What role will entrepreneurship have in the future? According to Schumpeter, the role of the individual entrepreneur is declining, he compares it to army commanders. This is du to innovation depending more and more on figuring out.
Entrepreneurial gains Is also described as above normal profit, But entrepreneurial gains differ because they vanish over time, and they spell loses for the entrepreneurs and the investors who failed.
Entrepreneurial gains are not net profits, because it spells loses to: 1. To the whole set of people who attempted entrepreneurial ventures 2. To the industrial sector n which innovation occurs 3. to the capitalist interests that finance entrepreneurial activity and the capitalist class as a whole.
Who are the losers? The old firms in the industry whom has to reorganize, in the revolutionized new reality.
Do profits survive No, profits do not move from old industries to new, but capital is incessantly destroyed and created.
Created by: 1371300376
 

 



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