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  • Journal of Economic History

Why Schumpeter Was Right: Innovation, Market Power and Creative Destruction in 1920s America

By: Tom Nicholas
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Abstract

Are firms with strong market positions powerful engines of technological progress? Joseph Schumpeter thought so, but his hypothesis has proved difficult to verify empirically. This article highlights Schumpeterian market-power and creative-destruction effects in a sample of early-twentieth-century U.S. industrial firms; his contention that an efficiently functioning capital market has a positive effect on the rate of innovation is also confirmed. Despite market power abuses by incumbents, the extent of innovation stands out: 21 percent of patents assigned to the firms sampled between 1920 and 1928 are cited in patents granted between 1976 and 2002.

Keywords

Innovation and Invention; Power and Influence; Emerging Markets; Rank and Position; Status and Position; Capital Markets; Capital Structure; Information Technology; Patents; Creativity; Economic Systems; Development Economics; United States

Citation

Nicholas, Tom. "Why Schumpeter Was Right: Innovation, Market Power and Creative Destruction in 1920s America." Journal of Economic History 63, no. 4 (December 2003).
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About The Author

Tom Nicholas

Entrepreneurial Management
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