Innovation and institutional change: the transition to a sustainable ...

Theoretical perspectives 13
labour-saving) and capital accumulation. The importance can hardly be
overestimated: it is a particular institutional set-up that creates incentives to
generate innovation and utilise science for that goal, and to expand
production scales, markets and products (Rosenberg, 1994: 88-97).
Schumpeter explicitly points at innovations as the prime drivers of economic
development. He defines innovation as the carrying out of new
combinations, through “the doing of new things or the doing of things that
are already being done in a new way” (Schumpeter, 1928: 377-378; 1947:
151). He emphasised the radical nature of innovation in the sense that such
innovations trigger processes of creative destruction, making existing firms
and economic structures obsolete: “the new processes do not, and generally
cannot, evolve out of the old firms, but place themselves side by side with
them and attack them” (Schumpeter, 1928: 384). Schumpeter makes a
distinction between the managerial and the entrepreneurial function, with the
former focussed on optimising routine work in a stable configuration and the
latter keen on new possibilities and getting new things done as they “are
able to cope with the resistance and difficulties which action always meets
outside the ruts of established practice” (Schumpeter, 1947: 152).
Entrepreneurship is central in his understanding of economic evolution, with
the successful creation of a ‘new combination’ leading to large gains,
triggering imitation by others, and involving clustering of innovations that
disturbs ways of doing things and equilibrium throughout the economy.
Schumpeter pointed at the interaction of institutional forms with
entrepreneurial activity as he identified a shift from an entrepreneurial
regime, with innovations primarily associated with the entry of new firms,
towards a ‘routinised regime’, with increasing routinisation of innovation
within R&D departments of larger firms (Schumpeter, 1947; terminology
from Ruttan, 2001: 106). Schumpeter predicted the end of capitalism (and
creative destruction) and the formation of a whole new social structure
because of the loss of the entrepreneurial class in the routinised regime but
underestimated ways in which systems change may come about
(Schumpeter, 1947: 158). Schumpeter has been rather influential in setting
the agenda towards research on the nature of innovation and the innovation
process, the way radical innovations emerge and diffuse (endogenously) and
undermine stability in the economic system, and the way clusters of
innovations evoke structural economic change.
Sociologists’ starting points
To understand change of systems in production and consumption the view
on innovations and the behaviour of producers and users needs to be
complemented by an understanding of how such a system is on the one hand
embedded in broader processes of societal change and on the other hand