Revisiting Schumpeter in Europe: Place-based innovation and transformative industrial policy

Luc Soete & Johan Stierna


This paper offers a Schumpeterian perspective on the policy responses to the current polycrisis environment, the European Union (EU) finds itself confronted with. Joseph Schumpeter developed most of his insights into long-term economic and political development while being confronted himself with major transformative, societal changes: political, economic and technological ones. From this perspective, the current turbulent times of rising geo-political tensions, unsustainable development resulting in out-of-control climate change and declining biodiversity, and widespread application of Artificial Intelligence (AI), have a lot in common with the period in which Schumpeter developed his thoughts and hence might benefit from a closer look at those Schumpeterian insights. Times of turbulence require transformative policies integrating various policy areas. However, while ‘transformation’ will often be perceived as essential at a global level: “transform or be transformed”, it will also be understood by citizens living in concrete places as a threat or a sudden unexpected confrontation with new uncertainties. In this context, ‘places’ need to become increasingly recognized as important for industrial policy, just as they are for climate, energy, agriculture, and innovation policy. The analysis presented here highlights following Schumpeter’s insights, the need for an open industrial transformation approach less based on old, national industrial policy notions but adopting a new vision on the role of place-based industrial innovation in strengthening Europe’s long-term resilience to political, economic and technological change.

JEL Classification: F63, L52, N74, O25, P18, Q48

Keywords: Industrial policy, Schumpeterian dynamics, green energy transformation

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