The foundations of Schumpeterian dynamics: The European evidence

The identification of the full range of ingredients of the Schumpeterian dynamics enables to contribute the analytical framework of evolutionary complexity. According to this Schumpeterian perspective, broad societal transformations, as the opening of international trade, can be viewed as the causes and consequences of the Schumpeterian creative response that enables economies to cope with the rapid and radical change of product and factor markets by means the introduction of innovations. Innovations support the increase of total factor productivity (TFP), however, only if, when, and where new technological knowledge could be generated at costs below equilibrium. The econometric evidence of 14 European countries in the years 1990–2016 shows that a larger country’s trade openness increases the TFP both directly, from market selection, and indirectly, from greater innovative efforts that were stronger the lower the unit patent costs.