Innovation economics and the role of the innovative entrepreneur in economic theory

Innovation has become a widely used, but ill-defined, everyday term in the 21st century. Firms are urged to be innovative to gain or sustain a ‘competitive edge’; consultants advertise their strategic advice as the essence of innovation; the survival of local organisations depends on the capacity building that comes from innovation; schools are exalted to have innovation in their curriculum; and universities promote themselves as leaders in innovation. Likewise, the term entrepreneur, used to describe the human agency behind innovation, is equally ill-defined in everyday use. Entrepreneurs’ value to society varies widely from positive to negative depending on the emphasis of journalists, academics, businesspersons, unionists, right-wing think tanks and left-wing activists. Such imprecise definition is, however, undesirable in academic discourse and the focus of this paper is the shifting role of the innovative entrepreneur in economic theory and some of the reasons for this dynamic. In this paper, innovation economics is defined as a body of economic theory that contends a priori that economic development is the result of appropriated knowledge, innovation and entrepreneurship operating within an institutional environment of systems of innovation. This distinguishes innovation economics from other branches of economics, including mainstream neoclassical theory, which views capital accumulation as the primary driver of economic development, chiefly in the form of economic growth. In the innovation economics paradigm, the socio-economic world functions as an open and complex system, exhibiting tendencies to adaptation. This isin contrast to neoclassical economics that regards the economy as a closed system exhibiting tendencies to mechanical equilibrium. A history of economic thought perspective is adopted in this paper to first trace out the rise of the innovative entrepreneur in early theories of political economy, to in effect create a nascent innovation economics. Then, the disappearance of innovation economics is facilitated by the infanticide of the innovative entrepreneur at the hands of neoclassical theory. In the first half of the 20th century, the history of economic thought marked the resurrection of the entrepreneur as an innovating agent by Joseph Schumpeter and then the nurturing of this agent in economic theory by Mich