Entrepreneurship and Creative Destruction: Towards an Integrated Framework for Political Economy

Abstract

The relationship between entrepreneurship and institutions has attracted substantial scholarly attention in recent decades, yet the major theoretical traditions in entrepreneurship theory have largely developed in isolation from one another, as if describing incompatible or mutually exclusive phenomena. This paper argues that such fragmentation is both unnecessary and analytically costly, and proposes a synthesis that integrates the four most influential traditions — Schumpeterian, Kirznerian, Knightian, and Baumolian — into a unified framework for institutional political economy. The first part of the paper offers a systematic and comparative review of these four theoretical traditions, identifying the specific dimension of entrepreneurial action each one illuminates and the limitations that emerge when each is considered in isolation. The second part constructs an integrated conceptual framework that articulates four analytical dimensions — innovation, epistemic discovery, judgment under uncertainty, and institutional environment — as interdependent components of a general theory of the entrepreneur. The third part applies this framework to the empirical analysis of creative destruction as a structural dynamic of contemporary capitalism, engaging critically with recent evidence on declining business dynamism, market concentration, and productivity dispersion. We argue that the apparent paradox of a capitalism producing unprecedented technological innovation while simultaneously exhibiting declining measures of entrepreneurial dynamism cannot be resolved through any single theoretical tradition and requires precisely the kind of multi-dimensional analysis the integrated framework provides. Implications for institutional theory and economic policy are discussed.

Comments