Write an essay, answering the following question: 1. Creative Destruction . Explain Schumpeter’s theory of creative destruction and discuss the following: - Some say we exaggerate the role played by...

Running Head: Creative Destruction                             1
Creative Destruction                                         2
CREATIVE DESTRUCTION
Table of Contents
Introduction    3
Creative Destruction    3
Insights on Creative Destruction and Technology    4
Impact of Creative destruction    6
Cost and benefit    7
Conclusion    8
References    9
Introduction
Some contend that the importance of technological innovation and 'creative destruction' in business has been overstated. This essay examines Schumpeter's Theory of Creative Destruction in light of its implications, as well as its drawbacks and benefits from a macroeconomic and social standpoint.
Creative Destruction
When new manufacturing units replace outmoded ones as a result of continuous product and process innovation, this is known as creative destruction. This restructuring process affects major macroeconomic performance areas of macroeconomic performance are affected by this restructuring process, including long-term growth, economic volatility, structural change, and the operation of factor markets.
Nearly the long term, restructuring is responsible for over 50% of productivity increase (Bottomore, 2010). Recessions often have lower rates of restructuring than boom times, which add significantly to their cost. Restrictions on the creative destruction process can have negative macroeconomic effects in both the long and short term.
Once structure interferes with the microeconomic process of creative destruction, it can have negative macroeconomic effects. The effectiveness of those judgments is dependent not just on management skill, but also on good institutions. These institutions create a healthy transactional framework. The most developed and adaptable economies are those that exhibit business cycle patterns that are somewhat influenced by these institutional limits. They can aid in the explanation of enduring macroeconomic problems including the cyclical nature of wages, investment, and unemployment.
In market economies, the process of creative destruction is a key factor driving economic expansion. Factor reallocation and, in particular, employment flows are the most often utilized empirical proxies for the degree of the creative destruction process. By describing the massive employment movements inside US industry and documenting them, D’Orlando, Ferrante, & Oliverio, (2021) provided the best window into this process.
Many writers have created more or less equivalent metrics of employment flows for a range of nations and events in response to the work done by DHS for the United States. In particular, there are significant, continuing, and persistent fluxes in both employment creation and destruction. The majority of employment transfers occur inside specifically defined economic sectors as opposed to between them.
Over 50% of the ten-year productivity gain in the US manufacturing sector between 1977 and 1987 is attributed to creative destruction and inter-plant reallocation (between-plant). Industry-level productivity changes are broken down by Aghion, Antonin, & Bunel, (2021) into inside-plant and outside-plant components. They come to the conclusion that the latter, who is most closely tied to the creative destruction component, accounts for more than half of the increase in output during this time.
According to the authors of a research on US manufacturing in the 1990s, entry / exit account for half of the reallocation that contributes to productivity development within an industry (Aghion, Akcigit, Deaton, & Roulet, 2016). While fresh plants go through a learning...