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While the concept of innovation is omnipresent today and symbolizes the latest form of modernity, it is nevertheless very old and has not always been associated with progress and growth. According to B. Godin (2014), this concept dates back to Antiquity and was used by Greek philosophers in their political theories. This political meaning remained dominant until the 19th century. Until then, innovation evoked a “change in the established order” in politics and religion. Innovation was thus subject to prohibitions (e.g. by King Edward VI of England in 1548), and religious or political innovators (such as the French revolutionaries of the 18th century and the reformers of the 19th century) faced charges, imprisonment or worse. It was not until the 20th century that the meaning of the word “innovation” changed and became associated with progress, creativity and economic growth. From that century on, “there is no longer any doubt that innovation has become a virtue, not a vice” (Godin 2014, p. 33). Innovation then clearly became associated with technology.

J. A. Schumpeter is considered the first economist to use and construct an economic theory of innovation. Yet, before him, classical economists were largely interested in the changes brought about by technical progress, a term found in the writings of A. Smith, D. Ricardo, J.B. Say and K. Marx, to name but a few. At the beginning of the 19th century, Saint-Simonism (H. de Saint-Simon, 1760–1825) widely popularized the idea that technical progress (via “industrialism”) was the necessary condition for improving the well-being of humanity. Moreover, as pointed out by B. Godin (2014), the sociologist G. Tarde (1843–1904) is often mentioned as the first to have devoted theoretical writings to innovation at the end of the 19th century. In The Theory of Economic Development (1981), Schumpeter considers that evolution results from the implementation of new combinations of means of production: the manufacture of a new good, the introduction of a new production method, the opening of a new outlet, the conquest of a new source of raw materials or of semi-finished products, the realization of a new organization, such as the creation of a monopoly situation. The importance of this definition and, more generally, of the Schumpeterian analysis of innovation can be explained by several arguments, which we present below:

First of all, this definition is important because, for the first time, it distinguished the various forms that innovation can take, without reducing it to technology. This variety is central to the contemporary definition proposed by the OECD in the Oslo Manual (OECD 2005), which distinguishes the product, process, new business method and new organizational method (OECD 2005). The most recent definition (OECD 2018) focuses on the enterprise and simplifies this definition by distinguishing product and business process innovation (OECD 2019). The notion of “business” processes refers to the traditional functions of the enterprise. It brings together process, and the organizational and marketing innovations defined in previous versions of the manual.

However, in the Schumpeterian analysis of long-term economic cycles (business cycles), the so-called Kondratieff cycles or waves, technology plays a major role. In Business Cycles (1939), Schumpeter in fact links the three Kondratieff movements from 1750 to 1940 and the three waves of fundamental innovations, which essentially concern technology: textiles, iron and steel, steam at the end of the 18th century, railways in the mid-19th century; and electricity, automobiles, chemicals at the beginning of the 20th century. The role of technological innovation was then crucial in explaining economic cycles (Uzunidis 1996). These innovations lead to an increase in supply capacity (increased demand for production goods, lower production costs, increased quantities of new products on offer) and a revival of demand (new consumption needs, credit). We also find this primacy of technology in the analysis in terms of the techno-economic paradigm proposed by C. Freeman and C. Perez (Freeman 2008; Perez 2010). This is defined as the set of most successful or profitable practices, in terms of the choice of inputs, methods and technologies, and organizational structures, business models and strategy. The paradigm forms a kind of common sense that facilitates technology diffusion.

In Schumpeter’s analysis, innovation is therefore associated with evolution and change. This is the second essential point. It is new combinations that cause the hurricane of “creative destruction” (2008), continuously destroying old elements and creating new ones. Thus, the changes brought about by innovation also have negative consequences. Going back to the analysis of long waves, over-investment in the growth phase is punished by losses, layoffs and bankruptcies, creating a “vacuum cleaning” effect that can unleash the entrepreneurial spirit again.

This central role of technology, and therefore the potential for change it offers, is still a subject of debate today. For R. Gordon (2016), for example, information and communication technologies affect a smaller number of activities compared to the key technologies of the second industrial revolution (electricity, automobiles and aviation), which hampers the recovery of activity. Other authors, however, believe that current technologies bring many opportunities, jobs and growth, but that the economic and social system does not sufficiently promote their exploitation and diffusion. According to D. Archibugi (2016), for example, massive public investments, in science and technology, as well as in infrastructure, should be made to help companies develop marketable products and services. The current context of the strong financialization of the economy, which makes stock market investments more remunerative and more risky than productive ones, also plays a key role in the absence of the long-awaited recovery of a new long-term cycle (Uzunidis 2003). The orientation of science and technical progress towards short-term profitability objectives and the insufficient consideration of major challenges (such as climate change, population aging, pandemics) are also obstacles to the emergence of a new cycle.

Admittedly, and this is the third argument justifying the importance of Schumpeter’s contribution, not all innovations have the same effects. New combinations may result from continuous and small-scale transformations – minor or incremental innovations – and their effect on economic structure is therefore limited. New combinations that appear discontinuously are similar to radical innovation. These are innovations that have a significant impact on the market and the activity of firms. This impact may concern the modification of market structure, the creation of new markets or the rendering of existing products obsolete. In reality, however, in Schumpeter’s analysis of cycles, new combinations appear in clusters, thus combining major and minor innovations. Radical innovations initiated by entrepreneurs begin the cycle. The creation of profit opportunities attracts mimicking entrepreneurs who propose minor innovations and thus extend the growth trajectory at a slower pace until the cycle turns around. Researchers today refer to a third category, “disruptive” innovation (Christensen 1997, 2003). Its characteristic is to introduce new performance criteria by targeting different users. It is opposed to continuous innovation and favors new entrants who adopt a different business model. Thus, the notions of disruptive and radical innovation are close, but radical innovation is more associated with new technologies, stemming from scientific and technical progress, while disruptive innovation can also be associated with non-technological changes. Products may be simpler or offer new features that will appeal to new consumers.

The fourth argument is that innovation corresponds to an “economic function” embodied by certain individuals. For Schumpeter, these are the “entrepreneurs”, whose function is to execute new combinations (Schumpeter 1981). We will return to its characteristics later. By emphasizing this function of commercialization or introduction into production, Schumpeter highlights the essential difference between novelty or invention (in the technical field) and innovation. If the invention is defined as a technical solution to a technical problem, innovation consists of productive and commercial exploitation, with the aim of making a profit. The characteristic that distinguishes a mere novelty from an innovation is that the latter involves implementation, whether it is a market launch for a product or service or a productive use for process, marketing or organizational innovations. The objectives of innovation are always economic: to increase sales, to open new markets, to reduce the costs of production, of internal organization, or of internal and external transactions, and to increase labor productivity.

However, the creative power of entrepreneurship and the arrival of the “troop” of entrepreneurs, at the heart of his analysis in The Theory of Economic Development (Schumpeter 1981), depersonalizes itself in the course of his work, showing Schumpeter’s awareness of the nature and scope of the transformations that took place in the structure of capitalism since the beginning of the 20th century. The observation of the existence of what he calls “trustified capitalism” in Business Cycles (1939) will receive increasing attention to the point of becoming the essential cause of the historically determined character of capitalism in Capitalism, Socialism and Democracy (2008). The planning of technical progress by large companies and the development of private research laboratories with the aim of strengthening the potential for innovation mark the “bureaucratization” of technical progress. Technical progress is becoming depersonalized and automated (Schumpeter 2008). This bureaucratization, which is necessary to face competition, is a sign of the strengthening of monopolistic structures, which will, according to him, overwhelm both entrepreneurial spirit and capitalism (see section 13.4). Contemporary economists, especially neo-Schumpeterians, refer to this evolution by evoking a “Schumpeter Mark I” in which it is small firms that innovate, and a “Schumpeter Mark II” in which it is large firms that play this role (Malerba and Orsenigo 1995). In fact, as we show below, systemic relationships unite actors within innovation systems.