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Article

Creative Destruction and Aggregate Productivity Growth

Shigeru Fujita

Senior Economic Advisor and Economist

Q3 2008

Business Review — Productivity growth is the engine of economic growth and is responsible for rising standards of living. But all firms do not partake equally in the nation’s productivity growth.

Rather, according to economist Joseph Schumpeter’s theory, firms undergo a process of “creative destruction”: New firms that adapt to new knowledge cause the decline and eventual demise of incumbent firms. In this article, Shigeru Fujita surveys recent studies that examine the role of creative destruction in aggregate productivity growth.

This article appeared in the Third Quarter 2008 edition of Business Review.

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