Policy and Complex Systems
“ process is better described perhaps as one of assimilation …. [ T ] o organize a new industry in a less developed country is an art of entrepreneurial initiative . But it is evidently very different from the original process of innovation .” 37 This position is a misrepresentation of Schumpeter , He was not concerned with the novelty of technology but how it transformed the economy .
On consumption , Wallich challenged Schumpeter ’ s view that economies were transformed from the generation of new combinations . He argued that unlike in Schumpeter ’ s model , where production takes a central role , “ derived development ” had to build on consumption . He notes that derived development “ is based , not on innovation but on the assimilation of existing innovations . It is this feature that suggests the general concept of derived development — derived from innovations made elsewhere .” 38
This view would lock emerging countries at the tail end of the product cycle , making them perpetual importers of foreign products with no capacity for technological learning . This position reveals Wallich ’ s poor understanding of Schumpeter ’ s view of innovation . The assimilation of imported technology would be consistent with Schumpeter ’ s idea of the creation of new markets , provided this is associated with new combinations .
Other economists offered convenient interpretations of Schumpeter noting that emerging countries lacked the capacity for endogenous growth . Schumpeter argued that economic development comprised such change “ as are not forced upon it from without but arise by its own initiative , from within .” 39
Bonné , for example , argued that this view ignores the development impact of “ a factory established in an underdeveloped Middle Eastern country by European capital at the height of its flow towards the East half a century ago .” 40 For him , such an investment would constitute an imposition from outside and therefore would not be consistent with Schumpeter ’ s view of development . This constitutes a misreading of Schumpeter ’ s concept of economic transformation from within . The example , in fact , fits Schumpeter ’ s view that innovation includes the creation of new markets using existing technologies .
Bonné ’ s contention was that Schumpeter ’ s concept of development was too restrictive to accommodate the needs of emerging regions . Indeed , Schumpeter ’ s theory excluded “ mere growth of the economy , as shown by the growth of population and wealth .” 41 He focused on the structural transformation of the economy and not merely on expansion in growth .
Bonné pointed out that expansion in population is often a source of innovation . Ironically , he noted that such forces did under certain conditions generate new combinations . He said that the “ necessity of expanding production in a densely populated underdeveloped area has , time and again , caused revolutionary changes in local agricultural techniques , and , in particular , in irrigation . Innovation is frequently the result of population pressure , a nexus
37
Wallich , “ Some Notes Towards a Theory of Derived Development ,” 193 .
38
Ibid ., 195 .
39
Schumpeter , The Theory of Economic Development , 63 .
40
A . Bonné , Studies in Economic Development : With Special Reference to Conditions in the Underdeveloped Areas of Western Asia and India ( Westport , CT : Greenwood , 1957 ), 250 .
41
Schumpeter , The Theory of Economic Development , 63 .
10