Innovation is defined as an economic context in Schumpeter’s theory of economic development: economic development is driven by the discontinuous emergence of new combinations (innovations) that are economically more viable than the old way of doing things (Schumpeter, 1934). The role of innovations in creating development is expressed in the focal shifts that they produce, “which is replete with vitality, motivated by a small circle of personalities, and which does not consist in continuous adaptation” (Schumpeter, 1912/2002, p. 103).
Schumpeter’s innovation concept covers five areas:
(i) the introduction of a new good or a new quality of a good (product innovation);
(ii) the introduction of a new method of production, including a new way of handling a commodity commercially (process innovation);
(iii) the opening of a new market (market innovation);
(iv) the conquest of a new source of supply of raw material or intermediate input (input innovation); and
(v) the carrying out of a new organisation of industry (organisational innovation) (Schumpeter, 1934, p. 66).
He thus acknowledges the importance of the cumulative nature of knowledge by stating that a technical revolution cannot be understood without reference to the development that led up to it. And in Schumpeter (1942, p. 132) it is claimed that it has become much easier to do things that lie outside the familiar routine, and accordingly innovation itself can be perceived as being reduced to routine in the sense that technological progress has become the business of trained specialists. Although Schumpeter sees the innovation process as being increasingly more institutionalised, depersonalised and automatized, this does not imply that innovation itself has seized being a break with ‘business-as-usual’.
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Schumpeter (1942, p. 83) thus describes innovation as a “process of industrial mutation (... ) that incessantly revolutionizes the economic structure from within”. The incessant character of innovation should not be taken too literally, as the actual revolutions occur in discrete rushes—it is the process as a whole that works incessantly (Schumpeter, 1942,
Source: As referenced on (Drejer, 2004)
Drejer, I. (2004). Identifying innovation in surveys of services: a Schumpeterian perspective. Research Policy, 33(3), pp.551-562.