According to the works of Richard Cantillon and Adam Smith in the 17th and early 18th century, innovation holds an important position in capitalism. In a market economy the basic economic problem (what to produce, how to produce, and for whom to produce) is solved by entrepreneurs on a trial-and-error basis. An entrepreneur is a person who pays known costs of production to exploit opportunities in order to maximize financial returns. Thus, entrepreneurship is associated with innovation: a really novel idea either creates a new market or introduces a product to a related market that already exists.
Although these early writings emphasized the role of entrepreneurship, the place of the entrepreneur in traditional economics presents theoretical difficulties. Alfred Marshall for example, observed that in the long-run equilibrium of a completely competitive market, there was no room for “entrepreneurs” as innovators. William Baumol is given credit for his own painstaking efforts to convince economists to make a bit more room for entrepreneurs in their theories. Baumol 's book, "The Microtheory of Innovative Entrepreneurship" is the first formal theoretical analysis in economics of the role of innovative entrepreneurs. In …show more content…
The idea behind this logic is that economic growth is non-uniform geographically and takes place around specific poles in any particular region. Growth Pole theory is based on Schumpeter’s Analysis of economic development. According to Schumpeter, economic growth or development occurs as a result of discontinuous spurts in a dynamic world. The growth poles are characterized by key industries around which key industries develop, through direct or indirect effects. The expansion of this key industry implies the expansion of output, employment, related investments as well as new technology and new industrial
Although these early writings emphasized the role of entrepreneurship, the place of the entrepreneur in traditional economics presents theoretical difficulties. Alfred Marshall for example, observed that in the long-run equilibrium of a completely competitive market, there was no room for “entrepreneurs” as innovators. William Baumol is given credit for his own painstaking efforts to convince economists to make a bit more room for entrepreneurs in their theories. Baumol 's book, "The Microtheory of Innovative Entrepreneurship" is the first formal theoretical analysis in economics of the role of innovative entrepreneurs. In …show more content…
The idea behind this logic is that economic growth is non-uniform geographically and takes place around specific poles in any particular region. Growth Pole theory is based on Schumpeter’s Analysis of economic development. According to Schumpeter, economic growth or development occurs as a result of discontinuous spurts in a dynamic world. The growth poles are characterized by key industries around which key industries develop, through direct or indirect effects. The expansion of this key industry implies the expansion of output, employment, related investments as well as new technology and new industrial