Schumpeter's view on entrepreneur and credit versus contemporary mega - banks problem (original) (raw)
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Schumpeterrs View on Entrepreneur and Credit Versus Contemporary Mega-Banks Problem
SSRN Electronic Journal
Considering Schumpeter's basic proposition about innovations as the strength of the capitalist dynamics, this paper focus on the main goal which is the answering the question: What was the Schumpeter's view on entrepreneur and credit versus modern mega-banks? The basic problems with the modern banks are mainly related with the level of concentration in the banking sector, the bonuses of the management (which are the derivative of bank's motivational systems) but most of all are related with phenomenon that the banking sector is pursuing goals, that are harmful to the long-term economic profitability. According to the Schumpeter banks should stimulate innovations implemented by etrepreneurs in the economy. Unfortunately the bankers nowadays seemed to have other priorities than those implied by their function in the economic system. According to Schumpeter credit contributes to the development, because development results from the activities of entrepreneurs. Other types of credit are not important from the point of view of "life process of the economic organism".
Schumpeter, the Banking System, and Innovation: Small versus Big Business
Joseph Schumpeter's writings on entrepreneurship and innovation have had a profound impact on economic theory and economic thought. Schumpeter initially saw the small entrepreneur as the source of innovation and economic growth within an economic system but later saw large corporations as the source of much innovation. Because large corporations, and in modern times many governments and universities as well, play such a large role in funding research and development and new innovations, much of the bank financing of innovation is done by smaller banks for small entrepreneurs and their ideas. Venture capitalists and self-financing are the other two major forms of small entrepreneur/small business financing. Meanwhile, the financial markets (stocks and bond markets) only indirectly play a role in funding the innovation of large corporations via changes in these firms' stock prices. Changes in stock prices reflect an estimate of the large firms' research and development efforts and their prospects for profitable, future innovation. Much corporate research and development is financed internally within the organization as an expense of doing business. Meanwhile, government and university funding through tax dollars and non-profit sources indirectly subsidize corporate innovation because governmental entities and universities take on risks that the private sector will often not tolerate. Yet, large corporations are often the beneficiaries of such governmental and university financing of research and development efforts. In today's times, Schumpeter would be impressed with the success of large firms regarding innovation but probably would be disappointed about the marginalization of the small entrepreneurial firm and the banking system and their diminished roles in innovation. This paper summarizes Schumpeter's views on how the banking system and financial markets could play a role in innovation and explains how a modern day monopoly capital system (Baran and Sweezy 1966) and its financial system have transformed entrepreneurship and innovation away from small business and innovation by the small entrepreneur.
THE INNOVATIVE ACTIVITY OF THE BANKS
Scholedge Publishing, 2018
ABSTACT Currently the bank sector plays an important role in the provision of innovative developments of the country economy. The solution of the task demands its competitiveness and innovative orientation of all financial-credit organizations in it's consistency. In connection with this first of all a great responsibility and importance lies on governments with banks. Mainly they'll play a fundamental role in the provision of high level investment activity in the economy in making financial support of a market infrastructure. Revolutionary changes in financial-credit sphere taking place in Azerbaijan Republic for the last decade caused high level dynamism of financial markets, specially of bank products market. During the short-term period of its development there was observed distribution of markets share among its participants, appearance of great amount of new participants, regular changes in the sphere of regulation market interrelationship by the government that served regular difference in additional inducements for fulfillment and change of existing spector of bank products. These processes integrally bring us to the bank activity sphere,having the "innovative" denomination. The aim of the research is the handling and foundation of methodological position on analysis, formation of innovative bank technology, providing the enhancement of the bank business efficiency. The subject of the research is the bank realizing innovative technology of bank service to natural persons at the modern stage development of home market economy. The object of the research is organisational-economic aspects of innovative activity of banks and utilisation of innovative bank technology. The theoretical and methodological basis of the research is the fundamental labours and scientific research results of national and foreign scientists in the sphere of theory and practice of innovative activity and banking, also local normative legal acts of commercial banks on investigated problem, publications in periodical and branch issues, materials of scientific-practical conferences and seminars.
Journal of Economic Issues, 2018
Is it possible to apply a Schumpeterian notion of entrepreneurial innovation to the financial sphere? Joseph A. Schumpeter, arguing that innovation could only be proposed by entrepreneurs and take place predominantly in the real sector, seems to propose a foundation for a contemporaray analysis of financial innovations. There is a lack of specific emphasis on the evolution of financial innovations in Schumpeter's work. The purpose of the paper is to demonstrate that Schumpeter's analysis of entrepreneurial innovation, which takes place in the real economy, also proposes a theoretical account for understanding the dynamics of financial innovations. Our aim is to propose a comparative study between entrepreneurial innovations and financial innovations. Nevertheless, analyzing financial innovations in the framework of Schumpeter's economic theory doesn't mean to legitimize them all. This is also an investigation for diversifying financial innovations according to their impact on the real economy. We provide a basic foundation for a post-Schumpeterian description of the evolution of the capitalist system.
The seventh stage of development of the banking system
2011
The key role for the dynamics of capital accumulation in capitalist economies of credit-money created by the banking system was highlighted by both Schumpeter (1911) and Keynes (1930). For these authors and their followers, such as Minsky (1986), unlike the conventional approach, the existence of banks issuing money (cash deposits) frees the investors of any prior need for savings, or, in other words, from wealth accumulated in the past and its distribution. Thus, banks are the only financial institutions that provide finance by being able to create money, and also act as financial intermediaries by participating in the creation of funding, differentiating themselves from other financial institutions which are called, consequently, non-bank. Non-banking institutions only exercise the function of intermediation of funds between surplus and deficit agents. Just by playing these two distinct yet linked functions, banks occupy a key position in payment and credit systems of modern capit...
Schumpeterian economic development and financial innovations: a conflicting evolution
Although in the Schumpeterian process of entrepreneurial innovations money and financial markets are assumed to affect economic development, Schumpeter does not explicitly study financial evolution and its effects on real dynamics. In order to fill this gap, this article suggests a Minsky-inspired interpretation of Schumpeterian institutional dynamics in monetary terms. It then develops a specific Schumpeterian analysis of the evolution of financial institutions and regulatory mechanisms in the wake of the 2007–08 crisis and points to major consequences of financial innovations on economic stability. It appears that unlike the creative destruction process of entrepreneurial innovations, in a liberalised/deregulated environment financial innovations move banks from their crucial role of financing long-term economic evolution and lead to reckless finance. Thus, financial market dynamics put economies on a destructive path. Such an evolution calls for active and tight rational regulation in order to shape capitalist finance towards more stable and welfare-enhancing strategies.
Bank Credit as a Source of Financing Innovative Development of Economy
2019
The article states that the current conditions of the development of the Ukrainian economy require the introduction of innovations, which increases the need for using balanced sources of their financing and rethinking the issues of theoretical substantiation of a comprehensive resource supply of transition to innovative economic growth. The role of credit in economic growth, its influence on social development through the purposes and possibilities for financing innovations in the economy has been proved. The scientific theories of credit of various economic schools (naturalistic, capital-making, institutionalism, and monetarism) have been studied. The approaches to determining the functional role of credit in the economy, according to which credit has a negative, moderate and strong impact on the economic process, have been systemized. It is stated that most researchers recognize the significant effect of credit on the growth of the economy, and its decisive force is manifested in ...
SCHUMPETER’S VIEW ON INNOVATION AND ENTREPRENEURSHIP
We are living in a complex and dynamic world in which innovation and entrepreneurship are occupying a decisive role for economic development. According to Joseph Alois Schumpeter "carrying out innovations is the only function which is fundamental in history". He also accented that It is entrepreneurship that "replaces today's Pareto optimum with tomorrow's different new thing". Schumpeter's words that entrepreneurship is innovation have never seemed so appropriate as the nowadays, when modern capitalism is experiencing a serious crisis and lost his strength during last subprime and euro-debt crises. The purpose of this paper is the analysis of the Schumpeter's innovation concept in a context of "first" and "second" Entrepreneurship theory.
Schumpeter on money, banking and finance: an institutionalist perspective
The European Journal of the History of Economic Thought, 2009
This paper offers an institutionalist interpretation of Schumpeter's contribution to economics based on an overall investigation of his works, from his early writings devoted to economic sociology to his late Capitalism, Socialism and Democracy, through his theory of economic development. This interpretation is then examined closely by revisiting the role of monetary, banking and financial institutions during the different phases of economic development. We conclude by maintaining that Schumpeter's overall framework is suitable and still very relevant for analysing institutional change.