The Schumpeterian model is a model of long-run economic growth model.
Called Schumpeterian growth theory or Schumpeterian growth paradigm, it is one of the two branches of innovation-based theory (the other being product-variety model). The Schumpeterian growth theory was developed by French economist Philippe Aghion and Peter Howitt (1992). it grew out of modern industrial organization theory. It focuses on quality-improving innovations that render old products obsolete and hence involves the force that Austrian-American economist Joseph Schumpeter called creative destruction. The SM models growth as resulting from innovations involving creative destruction.
The Schumpeterian growth theory is underlined by three main assumptions:
- Growth is primarily driven by technological innovations.
- Innovations are produced by entrepreneurs who seek monopoly rents from them.
- New technologies drive out old technologies.