The term “creative destruction” describes the sometimes painful shift of capital, labor and assets to higher levels of dynamism and productivity. This reallocation across an economy augurs stronger long-run growth and increasingly vibrant activity, particularly if new companies displace legacy firms. Some blame sluggish US growth since 2006 on a lack of creative destruction. But economists Chang-Tai Hsieh and Peter J. Klenow disagree. Their technically complex report on the ebb and flow of an economy will interest researchers and analysts.
In this summary, you will learn
- How creative destruction affects companies, industries and economies;
- How creative destruction and innovation are interrelated; and
- Why existing firms drive most of the innovation in a marketplace.
About the Authors
Chang-Tai Hsieh is an economics professor at the University of Chicago Booth School of Business. Peter J. Klenow is a professor of economic policy at Stanford University.