Joseph Schumpeter

AAA

DEFINITION of 'Joseph Schumpeter'

One of the 20th century's great economic and political thinkers. Joseph Schumpeter is well known for his theory explaining the activities that lead to economic growth in capitalist economies. His theory centers around entrepreneurial innovations and their role as the key driver of economic growth. Schumpeter argues that competition among market participants leads to a desire to seek out new ways to improve technology, new ways to do business and other types of advantages that would increase profit margins and directly impact the entrepreneur's standard of living.

BREAKING DOWN 'Joseph Schumpeter'

Schumpeter describes the act of new innovations replacing old innovations as "creative destruction." This process is driven by the inevitable copying of new innovations, which causes profit margins to become low and creates a new incentive to seek out new innovations. This is the essential idea behind capitalism as Schumpeter describes it.

RELATED TERMS
  1. Destructive Creation

    When innovation leads to destruction. Destructive creation was ...
  2. New Paradigm

    In the investing world, a new paradigm is a totally new way of ...
  3. New Economy

    A buzzword describing new, high-growth industries that are on ...
  4. Creative Destruction

    A term coined by Joseph Schumpeter in his work entitled "Capitalism, ...
  5. Venture Capitalist

    An investor who either provides capital to startup ventures or ...
  6. Freelancer

    A freelancer is an individual who earns money on a per-job or ...
Related Articles
  1. Fundamental Analysis

    How Influential Economists Changed Our History

    Find out how these five groundbreaking thinkers laid our financial foundations.
  2. Professionals

    7 Courses Finance Students Should Take

    These college classes will help you prepare for the working world. Learn how to stand out from your peers.
  3. Options & Futures

    Explaining The World Through Macroeconomic Analysis

    From unemployment and inflation to government policy, learn what macroeconomics measures and how it affects everyone.
  4. Retirement

    Investing Books It Pays To Read

    We provide some classic and lesser-known titles to add to your collection.
  5. Bonds & Fixed Income

    Can Keynesian Economics Reduce Boom-Bust Cycles?

    Learn about a British economist's proposed solution to a common economic problem.
  6. Entrepreneurship

    What Does Bootstrap Mean?

    The term bootstrap refers to launching and building a business with little capital and no funding from outside sources.
  7. Entrepreneurship

    Top 5 Startups That Emerged in Denver

    Learn why Denver is one of the hottest markets in America for startups, and identify five of the top startups that are emerging from the Denver market.
  8. Entrepreneurship

    How Does ClassPass Work and Make Money?

    Find out how ClassPass makes money, how the company aims to help both businesses and consumers, and why it has been so successful.
  9. Entrepreneurship

    Top 5 Startups That Emerged in Detroit

    Learn how startups are changing the face of Detroit, a city long dominated by large corporations, and identify the specific Detroit startups leading the trend.
  10. Entrepreneurship

    Top 5 Startups That Emerged in Boston

    Learn why Boston is a hot market for startups, and familiarize yourself with a few of the top startups that have emerged from the city.
RELATED FAQS
  1. What safeguards exist to prevent the abuse of power in a market economy?

    According to free market theory, safeguards against abuse in a market economy come in several forms. Examples of non-government ... Read Full Answer >>
  2. Can I buy insurance to reduce unlimited liability in a partnership?

    Partnership insurance is actually quite common. Most of the time, partners buy insurance to safeguard against the possibility ... Read Full Answer >>
  3. What are the benefits of prorating expenses?

    When a person prorates expenses between personal and business expenses, he is able to capture the maximum amount of tax benefits ... Read Full Answer >>
  4. What is the relationship between research and development and innovation?

    Although it's possible to achieve innovation without research and development and it's possible to conduct research and development ... Read Full Answer >>
  5. According to the neoclassical growth theory, what factors influence the growth of ...

    The neoclassical growth theory builds five major variables into its time-sensitive production formula. The first is total ... Read Full Answer >>
  6. How does the notion of the American Dream influence the US economy?

    The notion of the American Dream influences the U.S. economy because it creates the driving force behind the free enterprise ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  2. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  3. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  4. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  5. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
  6. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!