waves of fundamental innovations, which essentially concern technology: textiles, iron and steel, steam at the end of the 18th century, railways in the mid-19th century; and electricity, automobiles, chemicals at the beginning of the 20th century. The role of technological innovation was then crucial in explaining economic cycles (Uzunidis 1996). These innovations lead to an increase in supply capacity (increased demand for production goods, lower production costs, increased quantities of new products on offer) and a revival of demand (new consumption needs, credit). We also find this primacy of technology in the analysis in terms of the techno-economic paradigm proposed by C. Freeman and C. Perez (Freeman 2008; Perez 2010). This is defined as the set of most successful or profitable practices, in terms of the choice of inputs, methods and technologies, and organizational structures, business models and strategy. The paradigm forms a kind of common sense that facilitates technology diffusion.
In Schumpeter’s analysis, innovation is therefore associated with evolution and change. This is the second essential point. It is new combinations that cause the hurricane of “creative destruction” (2008), continuously destroying old elements and creating new ones. Thus, the changes brought about by innovation also have negative consequences. Going back to the analysis of long waves, over-investment in the growth phase is punished by losses, layoffs and bankruptcies, creating a “vacuum cleaning” effect that can unleash the entrepreneurial spirit again.
This central role of technology, and therefore the potential for change it offers, is still a subject of debate today. For R. Gordon (2016), for example, information and communication technologies affect a smaller number of activities compared to the key technologies of the second industrial revolution (electricity, automobiles and aviation), which hampers the recovery of activity. Other authors, however, believe that current technologies bring many opportunities, jobs and growth, but that the economic and social system does not sufficiently promote their exploitation and diffusion. According to D. Archibugi (2016), for example, massive public investments, in science and technology, as well as in infrastructure, should be made to help companies develop marketable products and services. The current context of the strong financialization of the economy, which makes stock market investments more remunerative and more risky than productive ones, also plays a key role in the absence of the long-awaited recovery of a new long-term cycle (Uzunidis 2003). The orientation of science and technical progress towards short-term profitability objectives and the insufficient consideration of major challenges (such as climate change, population aging, pandemics) are also obstacles to the emergence of a new cycle.
Admittedly, and this is the third argument justifying the importance of Schumpeter’s contribution, not all innovations have the same effects. New combinations may result from continuous and small-scale transformations – minor or incremental innovations – and their effect on economic structure is therefore limited. New combinations that appear discontinuously are similar to radical innovation. These are innovations that have a significant impact on the market and the activity of firms. This impact may concern the modification of market structure, the creation of new markets or the rendering of existing products obsolete. In reality, however, in Schumpeter’s analysis of cycles, new combinations appear in clusters, thus combining major and minor innovations. Radical innovations initiated by entrepreneurs begin the cycle. The creation of profit opportunities attracts mimicking entrepreneurs who propose minor innovations and thus extend the growth trajectory at a slower pace until the cycle turns around. Researchers today refer to a third category, “disruptive” innovation (Christensen 1997, 2003). Its characteristic is to introduce new performance criteria by targeting different users. It is opposed to continuous innovation and favors new entrants who adopt a different business model. Thus, the notions of disruptive and radical innovation are close, but radical innovation is more associated with new technologies, stemming from scientific and technical progress, while disruptive innovation can also be associated with non-technological changes. Products may be simpler or offer new features that will appeal to new consumers.
The fourth argument is that innovation corresponds to an “economic function” embodied by certain individuals. For Schumpeter, these are the “entrepreneurs”, whose function is to execute new combinations (Schumpeter 1981). We will return to its characteristics later. By emphasizing this function of commercialization or introduction into production, Schumpeter highlights the essential difference between novelty or invention (in the technical field) and innovation. If the invention is defined as a technical solution to a technical problem, innovation consists of productive and commercial exploitation, with the aim of making a profit. The characteristic that distinguishes a mere novelty from an innovation is that the latter involves implementation, whether it is a market launch for a product or service or a productive use for process, marketing or organizational innovations. The objectives of innovation are always economic: to increase sales, to open new markets, to reduce the costs of production, of internal organization, or of internal and external transactions, and to increase labor productivity.
However, the creative power of entrepreneurship and the arrival of the “troop” of entrepreneurs, at the heart of his analysis in The Theory of Economic Development (Schumpeter 1981), depersonalizes itself in the course of his work, showing Schumpeter’s awareness of the nature and scope of the transformations that took place in the structure of capitalism since the beginning of the 20th century. The observation of the existence of what he calls “trustified capitalism” in Business Cycles (1939) will receive increasing attention to the point of becoming the essential cause of the historically determined character of capitalism in Capitalism, Socialism and Democracy (2008). The planning of technical progress by large companies and the development of private research laboratories with the aim of strengthening the potential for innovation mark the “bureaucratization” of technical progress. Technical progress is becoming depersonalized and automated (Schumpeter 2008). This bureaucratization, which is necessary to face competition, is a sign of the strengthening of monopolistic structures, which will, according to him, overwhelm both entrepreneurial spirit and capitalism (see section 13.4). Contemporary economists, especially neo-Schumpeterians, refer to this evolution by evoking a “Schumpeter Mark I” in which it is small firms that innovate, and a “Schumpeter Mark II” in which it is large firms that play this role (Malerba and Orsenigo 1995). In fact, as we show below, systemic relationships unite actors within innovation systems.
1.3. How can we measure innovation, in all its forms?
Innovation is a multifaceted phenomenon and is not easily confined to a typical indicator. This is also the case for the measurement of economic growth, which is expressed, despite the limitations of this indicator, by the evolution of gross domestic product (GDP). Research & Development (R&D) and patents have long been considered as key indicators of innovation, the former measuring the resources allocated to innovation and the latter evaluating the results of the activity.
The measurement of R&D is based on data collected from companies and research organizations, according to the codification carried out by the Frascati Manual, the seventh edition of which was published in 2015. Gross domestic expenditure on R&D (GERD) refers to the total expenditure on R&D performed by businesses, the government, higher education and the private non-profit sector at the heart of the economy. These expenditures include R&D financed from abroad, but exclude the financing of the R&D activities of foreign businesses. R&D intensity is established by the ratio of R&D expenditure to GDP for a country or the ratio of R&D expenditure to turnover for companies.
Global R&D capacity, as measured by public and private investment, has doubled since the mid-1990s. This increase in global R&D capacity is due in particular to the growth in corporate spending, which accounts for about 70% of total R&D spending. While the financial crises that marked the period (the crisis in emerging countries in the early 1990s, the crisis of new economy start-ups in 2001, the financial crisis of 2008) have led to cyclical reductions in R&D investment, companies are also relying on innovation to boost the growth of their activities. This can also be explained by the strong increase in spending as a percentage of GDP in emerging countries (China, Korea and Israel), compared with slower growth in the EU-28,
