The factor of creative destruction in modern economic growth models and growth policy

Daniel D. Katukov, Viacheslav E. Malygin and Nataliya Smorodinskaya

Voprosy Ekonomiki, 2019, issue 7

Abstract: The paper examines the place of Schumpeterian idea of creative destruction in endogenous growth models, as well as its relevance for national competitive strategies under the ‘new normal’ situation. The difference between Schumpeterian growth models and the model elaborated by P. Romer is revealed. The paper analyzes modern interpretation of creative destruction as a process displacing low-performing firms by high-performing ones, as well as old products and technologies by more innovative ones through a market competition. It is shown that this process accelerates the dynamics of firms and the turnover of resources in an economy, thus leading to reallocation of investments and knowledge to the most productive agents. The paper highlights the importance of sustaining a dynamic balance between measures stimulating a firm-level innovation activity and measures supporting a barrier-free environment for an effective resource allocation in the economy. We consider cases of several developed and developing countries, which demonstrate negative implications of underutilized advantages of creative destruction and the risks of selective supporting policies towards exclusively high-growing firms. We conclude that without restarting the process of creative destruction in the Russian economy the national efforts to enhance competitiveness and growth may turn unproductive.

Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:nos:voprec:y:2019:id:2313

DOI: 10.32609/0042-8736-2019-7-95-118

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