Question

The Schumpterian hypothesis suggests there may be a direct relationship between firm size or seller concentration and the output of process and product innovation. With regard to this, if comparatively high levels of seller concentration are associated with greater technical or dynamic efficiency, what are some factors which might account for it?

Does the hypothesis imply that there may be a policy conflict between the pursuit of dynamic efficiency and the pursuit of other objectives like pareto/allocative efficiency?

Answer 1

Schumpeter trusts that a huge firm needs short-run lawful assurance which would give enough short-run advertises energy to make a motivating force to put resources into R&D. With no insurance, Schumpeter feels that expansive firms would not be as liable to put resources into creative exercises and there would be no mechanical change. Schumpeter expresses that exclusive expansive firms could initiate mechanical change since little firms were unequipped for "ideal" consumptions for R&D. At the end of the day, little firms would not be able to spend productive assets on R&D in light of the fact that doing as such would be excessively risky in such an aggressive situation. Schumpeter contends that expansive firms have a more noteworthy motivating force to spend more on R&D than little firms since they have more assets accessible to animate mechanical change and can anticipate that bigger additions will advancement than littler firms on the grounds that their piece of the overall industry (or market control) would fill in as a support to prompt impersonation.

A financial specialist wishing to contemplate advancement and R&D will experience difficulty ignoring the Schumpeterian theory on the grounds that despite the fact that his contention isn't sponsored by solid evidence, his contention is intelligent and solid in managing that development requires a sizable duty of assets and that impersonation by others (as on account of immaculate rivalry) lessens the prizes enough so that there are decreasing motivations to improve. Since inquire about is exorbitant for a little firm (which does not have the capital and broad innovation like the bigger firms) and it is more affordable for a little firm to impersonate another company's inventive exercises as opposed to improve itself, Schumpeter recommends that the little firm won't take part in numerous creative exercises.