Who was Joseph A. Schumpeter?
Joseph Alois Schumpeter, an Austrian-American economist, was one of the first to study entrepreneurs and the impact of entrepreneurial capitalism on society. As he wrote in The Theory of Economic Development, he believed that innovation and creativeness distinguished entrepreneurs from other businesspeople.
He observed that innovation and entrepreneurship are closely interwoven. He argued that the entrepreneur was at the very center of all business activity. He observed that entrepreneurs create “clusters of innovations” that are the causes of business cycles because their actions create disruptive dislocations and arrive in huge waves. In fact, Schumpeter believed that entrepreneurs deserve the credit for the industrial revolution.
Schumpeter introduced the phrase “creative destruction,” stating that the entrepreneur does not just invent things, but also exploits in novel ways what has already been invented.
He identified five types of entrepreneurial activity:
– new product innovation or the introduction of a new service
– new process innovation or new methods of production
– market innovation or the opening of new markets, input or resources innovation
– organizational innovation, which is the complete restructuring of an entire industry or the breaking up of a monopoly