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The role of innovation in economic growth is perceived differently by the different schools of thought. The neoclassical theories emphasise equilibrium in the economy and cannot explain the role of innovation, because the effect of innovation is actually a disturbance of equilibrium. Schumpeter (1961) has shown that growth and development can only take place if the economy is constantly disturbed to an out-of-equilibrium phase. In some of the later neoclassical theories, innovation was considered as a factor that causes growth, but was treated as an exogenous factor. The “new growth theories” were developed later, including innovation as an endogenous factor, but these theories were still based on the equilibrium principle. In the Schumpeterian and neoSchumpeterian theories, innovation is treated as endogenous to the economy. Schumpeter had not been acknowledged as a mainstream economist during the time that he developed and first published his theory. It was not until the 1980s that economists started paying attention to his works and to the importance of innovation in development. The aim of this article is to determine how the studies since 1980 have changed regarding their foundation in the different schools of thought. A methodological and theoretical review is conducted of post 1980 empirical studies that determined the relationship between innovation and economic development. It was found that many empirical studies still make use of neoclassical equilibrium models and that the studies that consider the complexity of the innovation system are not yet sufficiently developed to explain the relationship between innovation and economic development.

The Change in post 1980 Economic Development and Innovation Studies towards Evolutionary Economics