Innovation, Profits and Growth: Penrose and Schumpeter

Abstract

Abstract In this chapter the Schumpeterian theory of profits and growth through innovation is revisited and recast, with explicit reference to the changing institutional form of inno vation during the twentieth century. It is shown how many dues for the restatement and modernisation of Schumpeter’s approach can be found in Edith Penrose’s The Theory of the Growth of the Finn, her 1959 book having benefited from her reading of what for our purposes are the crucial aspects of Schumpeter (1943). The chapter has four parts following this introduction. Section II sets out an evolutionary and insti tutional account of how profits are created through innovation, which is contrasted with the standard interpretation of Schumpeter’s theory found in the literature.