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Is firm renewal stimulated by negative shocks? The status of negative driving forces in Schumpeterian and Darwinian economics

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  • Lennart Erixon

Abstract

The idea that firms are more innovative under difficult external condition has no prominent place in evolutionary economics. The neo-Schumpeterians agree with Schumpeter that innovation is stimulated by positive driving forces and associated with industrial renewal through creative destruction. Also Darwinian economists shed light on opportunity factors (variation) and selection. On the other hand, in neoclassical Schumpeterian models, fierce competition and low product demand may enforce innovation and productivity increases in established firms. An orthodox Schumpeterian tradition even maintains that innovation in depression is the cause of the following recovery. But the orthodox Schumpeterians are as reluctant as the neoclassical Schumpeterians to elaborate the underlying psychological mechanism. In the theory of transformation pressure, firms facing an actual decline in profit are supposed to be more creative and rational, or at least more anxious to follow near-rational heuristic rules, having a positive effect as a possible over-reaction on innovation and productivity growth.

Suggested Citation

  • Lennart Erixon, 2016. "Is firm renewal stimulated by negative shocks? The status of negative driving forces in Schumpeterian and Darwinian economics," Cambridge Journal of Economics, Oxford University Press, vol. 40(1), pages 93-121.
  • Handle: RePEc:oup:cambje:v:40:y:2016:i:1:p:93-121.
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    File URL: http://hdl.handle.net/10.1093/cje/beu068
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    Cited by:

    1. Fabrício Baron Mussi & Andre da Silva Zembro & Aline Alvares Melo, 2017. "Contributions of Philosophy of Science, in the Perspective of Popper and Lakatos, for the Study of Innovation: An Analysis of the Neoclassical Schumpeterian and Neo-schumpeterian Theories," Revista Facultad de Ciencias Económicas, Universidad Militar Nueva Granada, vol. 26(1), pages 9-25, December.
    2. Erixon, Lennart, 2016. "Building a path of equality to economic progress and macroeconomic stability - the economic theory of the Swedish model," Research Papers in Economics 2016:3, Stockholm University, Department of Economics.

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