Complexity , Innovation , and Development
In fact , Schumpeter contended that it was funders , not entrepreneurs , who took financial risks , as evidenced by the emergence of innovations in credit-providing institutions and other approaches for underwriting the risks such as state enterprises .
Critics of the application of the Schumpeterian model to emerging economies pointed out that these countries are often dominated by peasant farming , which in their view is not entrepreneurial because farmers tend to be perceived largely as producers whose output is then processed elsewhere . By their very nature , however , farmers are engaged in the constant creation of new combinations that involve discontinuous adaptations . Like in many industries they engage in routine practices that use established methods . But there are frequent occasions when farmers are forced to creatively respond to changes in their conditions . Under those circumstances their behavior is hardly different from that of entrepreneurs in other sectors . 77
Over the centuries , agriculture has shown remarkable capacity for entrepreneurial activity where key foundations for economic transformation and critical support systems such as research and development , infrastructure , technical training , credit , and improved policy environment are available to farmers . The great agricultural transformations of the last 150 years occurred in the United States , India , Brazil , China , and Mexico , among others , and resulted from efforts to increase foundations and support systems upon which entrepreneurship thrives . It is precisely the absence of these types of investments and the application of “ derived development ” models in the form of food aid that largely explain the low level of entrepreneurship in African agriculture . It is not just the years of neglect that affected African agriculture . 78
It is therefore notable that these foundations were also the only ones that received little policy attention in the “ derived development ” model . The challenges of emerging countries were compounded by international trade policies that punished them with tariff escalation if they tried to add value to their exports . In effect , they were structurally discouraged from creating new combinations .
Schumpeter ’ s example of railroads has two important policy implications for the current discourse of innovation policy . First , it underscores the importance of physical infrastructure in emerging countries . Such infrastructure , and the associated institutional changes , creates opportunities for entrepreneurs not only to participate in its construction but also to expand opportunities for new businesses . Second , infrastructure transforms the economic system in a discontinuous way by not only disrupting previous economic practices , but also by expanding opportunities for new economic combinations . Infrastructure projects serve as centers of origin and diffusion of technical capabilities into the wider economy . It is these same radical transformations that Schumpeter ’ s critics wished to see in emerging countries but rejected the approaches that would have allowed for their advancement .
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These dual attributes of farmers are discussed in R . E . Sachs , “ The Farmer — An Entrepreneurial Personality ? A Socio-Psychological Analysis of Decision-Making , with Special Regard to the Economic Behaviour of Farmers ,” Sociologia Ruralis 13 ( 2 ) ( 1973 ): 195 – 214 ; and M . Niska , H . Vesala , and K . Vesala , “ Peasantry and Entrepreneurship as Frames for Farming : Reflections on Farmers ’ Values and Agricultural Policy Discourses ,” Sociologia Ruralis 52 ( 4 ) ( 2012 ): 453 – 469 .
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This theme is explored in detail in C . Juma , The New Harvest : Agricultural Innovation in Africa ( New York : Oxford University Press , 2011 ).
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