Endogenous innovation: the creative response

The limits of both evolutionary approaches, based upon biological metaphors, and the new growth theory based on the early economics of knowledge, are becoming apparent. Considerable progress can be made by implementing an evolutionary complexity approach that builds upon the legacy of Schumpeter [1947a. ‘The Creative Response in Economic History’. The Journal of Economic History 7 (2): 149–159] with the notions of: (i) reactive decision-making; (ii) multiple feedback; (iii) innovation as the outcome of an emergent system process rather than individual action; (iv) organized complexity and knowledge connectivity; (v) endogenous variety; (vi) non-ergodic path dependent dynamics. Building upon these bases, the paper articulates an endogenous theory of innovation centered upon the analysis of the systemic conditions that make the creative reaction and hence the introduction of innovations possible.