The process of creative destruction was described by Joseph Schumpeter (1928, 1937). The economist Schumpeter coined the term “creative destruction” that decades later influenced the foundation of the whole arm of academic research in “strategic management” and the “resource-based view of the firm”. Schumpeter’s term referred to the feasibility of new ways of competing.
He observed, that firms were not static output-restrained entities, but that their interactions with the market were of interest and impact to the whole economic system. He noted the cost of resource investment as barrier to firm imitators.
Yet he also reflected, that copycats would always exist in markets. New ways of doing business could produce above normal returns on investments. And Schumpeter concluded that exogenous disruptions are vital to “creative destruction”. In his observation, at the core of the firm was the entrepreneurial vision. Creating or adopting innovations would give firms the necessary competitive advantage.
His work is giving intangible asset creation, firm theory and the processes necessary for creation new integrative meaning. To put it simple; questioning the status quo may give an advantage to innovation in firms, however healthy earnings could also result from less ‘disruptive’ innovations.
…In dealing with capitalism we are dealing with an evolutionary process… (1942).
One Trackback
[...] for economists and accountants alike. Yet, this disruptive idea space (Ogle) was first named by Schumpeter as prerequisite to [...]