‘New Combinations’ in Schumpeter’s Economics: The Lineage of a Concept

Abstract

The notion of a new combination has long been a leitmotiv in theories of economic evolution and innovation. This article examines the origin of the term ‘new combination’ in Schumpeter’s work. After examining the diverse uses to which Schumpeter put the combinatorial concept, this article examines possible intellectual antecedents to Schumpeter’s use of the idea. Although he is often credited as being the originator of the concept, Schumpeter himself cited Jean-Baptiste Say as a precursor, while other scholars have identified Marx as an inspirational source for Schumpeter’s ideas on the combinatorics of innovation.

Keywords:

• Schumpeter
• innovation
• entrepreneurship
• new combinations

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

Acknowledgements

I would like to thank Tony Endres and one anonymous referee for their helpful suggestions in improving this paper. Any remaining errors are the author’s.

Notes

1 See Harper (2018) for a survey of how major economic theories of innovation differ in how they implement the notion of a new combination – how they differ in their treatment of: (a) the types of things (e.g. factors of production, routines) that are combined; and (b) the nature of the combination operation involved that connects these elements to form a combination.

2 For Schumpeter, shareholders are just a special kind of creditor: ‘The only realistic definition of stockholders is that they are creditors (capitalists) who forego part of the legal protection usually extended to creditors, in exchange for the right to participate in profits. To the economist, the legal construction of an equity in this case is but a lawyer’s fiction that almost caricatures the real situation’ (Schumpeter 1939, 104).

3 In the various German-language editions of The Theory of Economic Development, Schumpeter opts for the word ‘die Neuerung’ instead of ‘die Innovation’, even though ‘die Innovation’ had been in use in the German language since the nineteenth century. In his examination of innovation concepts in the humanities and the social sciences, Godin suggests that ‘combination is a precursor term to innovation, a term that goes back to studies of the imagination in the eighteenth century’ (2015, 233; emphasis added). Godin (2014, 13) argues that the reason why the term ‘combination’ circulated widely before the term ‘innovation’ is because the former carried more positive connotations than the latter.

4 The original German text is as follows: ‘Endlich gibt es Definitionen [der Funktion des Unternehmers], die wir einfach akzeptieren könnten. Da ist vor allem die bekannte, die auf J. B. Say zurückgeht: Die Funktion des Unternehmers ist, die Produktionsfaktoren zu kombinieren, zusammenzubringen’ (Schumpeter 1926, 113).

5 On the use of the organic metaphor in German economic thought, see Hutter (1994).

6 The words ‘combinaison’ and ‘combiner’ are defined in the first volumes of the fifth and sixth editions of the Le Dictionnaire de L’Académie Française, which were published in 1798 and 1835, respectively – that is, in the period immediately before and after Say wrote his treatise. Indeed, both ‘combinaison’ and ‘combiner’ had a long vintage, having both appeared in the first volume of the first edition of the Academy’s Dictionary published in 1694.

7 ‘Comment se joignent l’industrie, les capitaux et les fonds de terre pour produire. Nous avons vu de quelle manière l’industrie, les capitaux et les fond de terre concourent … á la production’ (Say 1803a, 32). (In later French editions, ‘les fonds de terre’ (‘land’) in this passage was replaced by ‘les agents naturels’ (‘natural agents’).) The English translation, based on the fourth French edition, translates this text as: ‘Of the mode in which industry, capital, and natural agents unite for the purpose of production. We have seen how industry capital, and natural agents concur in production’ (1821a, 24; emphasis added).

8 Although he was critical of Marx’s materialist interpretation of history and employed different methods, Schumpeter recognized significant commonalities between his own aims and ideas and those of Marx. On Schumpeter’s vision and its relation to Marx’s, see Steen (2004) and Shionoya (2005, ch. 8; 2007).

9 For a comparison of entrepreneurship in Marx and Schumpeter, see Blaug (1986) and Young (1986).

10 The full essay was translated by Becker and Knudsen and is available in Schumpeter (2005). They do a fine job of translating Schumpeter’s difficult, and at times quite convoluted, text. Because their translation focuses more on the spirit rather than the letter of Schumpeter’s article, I have chosen to supplement their efforts with my own translation of Schumpeter’s terminology and ideas relating to the nature of innovation and economic development since a stricter following of his exact words better serves my current purposes. For example, they translate Schumpeter as admitting that he himself ‘produced a mess’ (2005, 115) when he first coined the term ‘development’, but he does not quite say that exactly in his own words. From my reading of the relevant passage (Schumpeter 1932, 8), he says that his use of the term ‘development’ led to something similar to his use of the term ‘Dynamik’ (‘dynamics’), originally used by him as a synonym for ‘development’, but which was ‘völlig deplaciert’ (‘completely misplaced’) and led to ‘irreführende Assoziationen’ (‘misleading associations’).

Additional information

Notes on contributors

David A. Harper

David A. Harper, Clinical Professor of Economics, Department of Economics, New York University, has a special interest in innovation, entrepreneurship and capital formation as well as a more generalized interest in the institutional foundations of the market economy.