Innovation in economic evolution: Reintroducing Schumpeterian thought to current advances in economic sociology

Abstract

The most promising perspectives for a transdisciplinary dialogue between economics and sociology may be identified in the sub-disciplinary fields of evolutionary economics and economic sociology. Both share a common intellectual legacy in the differentiation of the social sciences. The economic and sociological work of Joseph Schumpeter provides an outstanding point of cross-disciplinary transgression and reintegration. In this context, this article claims that it is a curious fact that the role of technological and organizational innovation as a driving force of capitalist evolution characterized by disruptive change has become the paradigmatic foundation of related debates in evolutionary economics, but not in economic sociology. Of course, in economic sociology, technological change has been repeatedly covered regarding the social structures and network relations underpinning technological change in various settings of organizations, industries, markets and spaces. Yet the phenomenon of the introduction of novelty as such, drawing on constellations of power and domination in the context of radical uncertainty, enforcing the disruption and reconfiguration of social relations has remained rather underrepresented in the major strands of sociological reasoning on economic affairs. This assessment holds especially for neo-institutionalist reasoning, which emphasizes the drive towards stability in industries and markets, and therefore underestimates the actual characteristic of capitalism an innovation-driven system of persistently radical changes. Elaborating on this concern, this article outlines the basic relationship between evolutionary economics and economic sociology as point of departure for presenting the evolutionary approach to innovation as a promising concept for future reasoning in economic sociology. In conclusion, this implies that bringing innovation back into economic sociology implies a revitalization of Schumpeterian positions while entering a transdisciplinary dialogue with current advances in evolutionary economics and related fields of innovation studies.

Introduction

A promising perspective for a transdisciplinary dialogue between economics and sociology may be identified in the sub-disciplinary fields of evolutionary economics and economic sociology. They share a common intellectual legacy in the differentiation of the social sciences. The economic and sociological work of economist and sociologist Joseph Schumpeter (1883–1950) provides an outstanding point of cross-disciplinary transgression and reintegration. In this context, this article claims that it is a curious fact that the role of technological and organizational innovation as a driving force of capitalist evolution characterized by disruptive change has become the paradigmatic foundation of related debates in evolutionary economics, but not in economic sociology. Of course, in economic sociology, technological change has been repeatedly covered regarding the social structures and network relations underpinning technological change in various settings of organizations, industries, markets and spaces. Yet the Schumpeterian view on innovation as economic and social process, drawing on the capitalist logics of property, profit and competition while enforcing the disruption and reconfiguration of social relations in constellations of power and domination, has remained rather underrepresented in the major strands of recent advances in economic sociology. Elaborating on this concern, this article outlines the basic relationship between evolutionary economics and economic sociology as point of departure for presenting the Schumpeterian-inspired evolutionary approach to innovation as framework for future reasoning in economic sociology.

In discussing these issues, the article is structured as follows. The first section outlines the paradigmatic role of Schumpeter’s classical conceptualization of innovation as an evolutionary mechanism of economic change. Crucially, this concept of innovation draws on a historically specific process of the introduction of routine-breaking novelty that is subject to the selective filters of both economic and social forces. As outlined in the second section, this line of reasoning on the Schumpeterian innovation-evolution-nexus has emerged as pillar of debates on innovation and economic change in the domain of evolutionary economics. In reiterating Schumpeter’s Marxian references, it clearly accounts for a perception of capitalism as an economic system in persistent and indetermined motion driven by innovations that go hand in hand with new constellations of economic power and domination. The third section outlines traces of reasoning on innovation in economic sociology. It pinpoints disruptive economic and social change as crucial aspect of the Schumpeterian perspective that requires further sociological scrutiny. The conclusion provides an outlook on broader concerns with the transdisciplinary conversation between economic sociology and evolutionary economics that might be framed by the commonly shared evolutionary understanding of innovation-driven change as key characteristic of modern capitalism.

Innovation in economic evolution: the Schumpeterian perspective

The main intersections of commonalities and complementarities in the relationship between evolutionary economics and economic sociology relates to the matter of novelty, instability and change in the work of economist and sociologist Joseph Schumpeter (1883–1950), who is not only a key reference for evolutionary economists, but who put economic sociology on the map of economic analysis too. Next to Max Weber, Schumpeter stands out as classical inspiration for current advances in the economic sociology of modern capitalism by highlighting the role of technological and organizational innovations, in particular, the introduction of new production processes and products in capitalist evolution (Swedberg, 1991). The underlying analytical framework was meant to be comprehensive: Schumpeter identified economic history, statistics, economic theory and economic sociology as distinct analytical fields – with economic sociology explicitly denoting a typified, stylized or reasoned economic history that asks for the reasons, causes and effects of economic behaviour quite in line with the Weberian notion of Sozialökonomik (Schumpeter, 1954: 21). In this framework, economic sociology would be bound to address the matter of economic behaviour as well as the institutional underpinnings of the economic organization of the societies under consideration (Schumpeter, 1954: 544). This indispensable analytical role of economic sociology in Schumpeter’s reasoning is highlighted by the matter of innovation: the introduction of novelty requires entrepreneurial actors, who confront incumbent interests and break established routines, in doing so exercising social leadership in the economic sphere. This constellation of innovation and leadership versus routine and passive adaptation is explicitly presented as the sociological core of Schumpeter’s (1912: 545–548) theorizing.

Given the historical context of his scientific work, Schumpeter witnessed the developmental problems of late industrialization in Central Europe from the 1910s to the 1920s as well as the global rise of the US economy during the 1930s and 1940s (McCraw, 2009). In this way, Schumpeter was aware of the historical and institutional specificity of actors and actor configurations as drivers of innovation. Accordingly, Schumpeter’s abstract economic theorizing was meant as general approach to universal phenomena, yet the underlying institutional concepts, in particular, the concept of innovation, were open to be adapted to varying contexts and circumstances. This integration of history and theory in analysing capitalist development contributes to the persistent relevance of Schumpeterian ideas in the structural diversity of global capitalism (Ebner, 2000).

In view of his specific blend of economic and sociological concerns, Schumpeter adopted major aspects of the Weberian view on capitalist dynamics and reworked them into an evolutionary framework on the powers of innovation in capitalist evolution. Thus, Schumpeter portrayed capitalism as an evolutionary mechanism driven by the entrepreneurial introduction of technological and organizational novelty in the shape of new production processes and products introduced by new firms and industries, and their selection through the mechanisms of market competition. The actual carriers of innovation, however, would depend on the institutional context, ranging from the individual entrepreneur in new firms through organizational networks of researchers, engineers, managers and workers on large corporations all the way to governmental departments (Schumpeter, 1942: 81–86).

This sensitivity for historical and even cultural variations of economic phenomena is well reflected in the diverse intellectual influences on Schumpeter’s view of innovation as driver of economic evolution. Despite various references to biological notions such as innovative ‘mutation’ and developmental ‘evolution’, Schumpeter’s actual orientation towards Darwinian evolutionary thought remains controversial in evolutionary economics (Witt, 2002, 2016). In fact, Schumpeter’s concern with innovation as internal force of evolutionary change seems to be decisively influenced by the contemporary vitalist philosophy of Bergson and Nietzsche – in this way clearly deviating from the naturalism of Social Darwinism (Ebner, 2020). When it comes to the related historical dimensions of Schumpeter’s concern with capitalism, the impact of the German Historical School and its doyen Gustav Schmoller has been outlined repeatedly (Ebner, 2000). Therefore, the interconnectedness of Schmollerian historism, Weberian Sozialökonomik and Schumpeterian economic sociology has been aptly labelled as ‘Schmoller-Weber-Schumpeter nexus’ that addresses historical and institutional specificities of capitalist evolution (Shionoya, 1997: 202–203). Adding to this assessment, the Marxian stimuli in Schumpeter’s reasoning have been repeatedly outlined – and they are especially relevant for reconsidering the Schumpeterian understanding of capitalism as an innovation-driven and conflict-ridden evolutionary process (Bottomore, 1992; Rosenberg, 2011).

The concern with Marxian and evolutionary ideas accompanied Schumpeter ever since his first publications after 1910 that were elaborated in the context of the Viennese academic milieu of the Austrian School, yet they became more explicit and differentiated in his mature work after Schumpeter had moved to Harvard in 1932. In the first monographic outline of his approach in Theorie der wirtschaftlichen Entwicklung from 1912, Schumpeter relates the idea of innovation to the concept of ‘new combinations’ of capital and labour, which inform new products and production processes. Crucially, the new combinations would involve substantial conflicts of interest between capital and labour, implying a distinct front of power struggles that would add to the conflicts between new and incumbent firms (Schumpeter, 1912). Curiously, Schumpeter (1934: xi) used the previously frowned upon concept of evolution for the first time in a prominent place in the English edition of his ‘Theory of Economic Development’ from 1934 as he pointed to economic change as a facet of cultural evolution. With this emphasis on evolutionary heuristics, an explicit reference to Marx came to the fore. Subsequently, Schumpeter (1993 [1937]) accentuated that he would share the Marxian ‘vision of economic evolution’ (p. XXII) as a process that is generated internally by the economic system itself, driving its self-transformation. Both the references to Marx and to the matter of evolutionary change may have been informed by the academic environment at Harvard. Indeed, references to Marx were more acceptable in the Harvard milieu than in Schumpeter’s earlier academic environments in Germany and Austria (Swedberg, 1991: 153–154). Schumpeter’s parallel embrace of biological evolutionary metaphors and analogies from the early 1930s onwards may also be explained by the fact that evolutionary biology had boosted its academic prestige in the same period (Bowler, 2003).

In this intellectual setting, Schumpeter’s major empirical monograph ‘Business Cycles’ concretized the historical–empirical specificity of his theory of capitalist evolution. The characteristics of economic development were now considered to be peculiarities of modern capitalism, presented as an economic system based on private property in which innovations are typically financed by credit (Schumpeter, 1939: 223). The economic system of capitalism was explicitly understood as an evolutionary process: ‘The changes in the economic process brought about by innovation, together with all their effects, and the response to them by the economic system, we shall designate by the term Economic Evolution’ (Schumpeter, 1939: 86). Schumpeter (1939) then emphasized with a distinctly Marxian undertone that his analyses were directly aimed at understanding the connection between capitalist evolution and bourgeois society, highlighting ‘the process of capitalist evolution – economic evolution as conditioning, and being conditioned by, the institutional pattern of bourgeois society’ (p. 304). Further contextual influence of the American industrial system can be seen in the fact that Schumpeter (1939) outlined technological and organizational innovations empirically with reference to a wide range of applications – from the opening of new markets through the Taylorization of work to the setting up of new business organizations: ‘in short, any “doing things differently” in the realm of economic life [. . .] – all these are instances of what we shall refer to by the term Innovation’ (p. 84).

In his subsequent volume ‘Capitalism, Socialism and Democracy’, which presented his basic ideas on the present and future perspectives of capitalism and socialism, Schumpeter (1942: 82) offered an examination of the institutional decline of capitalism with reference to Marxian ideas. The notion of ‘creative destruction’ was introduced as key characteristic of capitalist evolution:

[T]he same process of industrial mutation – if I may use that biological term – that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. (Schumpeter, 1942: 83)

The biological analogy of ‘industrial mutation’ should describe innovation whereas capitalist evolution would stand for an ‘organic process’ that ‘unfolds’ historically. Again, Schumpeter’s understanding of evolutionary economic change did not exclusively relate to Darwinian ideas, as the concept of ‘creative destruction’ also reflected Nietzsche’s and Bergson’s strands of vitalist philosophy, not to mention the reception of the latter by Werner Sombart and the German Historical School (Reinert and Reinert, 2006). In ‘History of Economic Analysis’, Schumpeter (1954: 789) even emphasized that describing capitalist dynamics as ‘struggle for existence’ might be appropriate only in a ‘non-tautological way’ that prioritizes economic facts without recourse to biology. Instead, the impact of vitalist philosophy underlines the role of human agency in the struggles over power and domination that characterize cultural evolution – of which economic evolution is a specific part.

Schumpeter’s theory of innovation in economic evolution thus remains accessible for a socio-economic interpretation that accentuates its status as a theory of the innovation-driven historical self-transformation of modern capitalism that would come to affect both evolutionary economics and economic sociology (Ebner, 2005). More specifically, the Schumpeterian view of innovation exhibited a nuanced historically sensitive approach that would come to understand that different phases of capitalism would be subject to different constellations of entrepreneurial interventions in the carrying out of innovation. Thus, the heroic entrepreneur of competitive capitalism in the 19th century would give way to a diverse set of entrepreneurial actors in monopolistic capitalism the 20th century, involving actors from the private and public sector, and in different historical situations even involving the state as major force in the innovation processes (Ebner, 2006a, 2006b). However, in view of these diverse institutional constellations, Schumpeter’s understanding of innovation and economic evolution as social processes fundamentally stayed the same: Innovation would be equated with social relations of power and domination that were instrumental in the breaking of established routines and incumbent positions in economy and society. In this view, the drive for innovation as a struggle over chances for technological and organizational domination is articulated in the framework of prevailing capitalist logics of property, profit and competition as it enforces the disruption and reconfiguration of social relations in constellations of power and domination. Accordingly, while Benoit Godin (2017: 25) and other historians of innovation have criticized Schumpeter’s lack of empirical specification when it comes to the actual ideal and material components of technological disruptions, it is still important to note that Schumpeter still excels as theorist of innovation-driven capitalism at large. This point also sheds light on the relevance of his ideas beyond the age of Western industrial capitalism he witnessed and explored. Post-Schumpeterian debates in evolutionary economics, as outlined below, have adopted the issue of innovation and evolution, yet they may benefit from an inflow of sociological concerns with power and domination in the economic field.

Post-Schumpeterian theorizing on innovation and economic evolution

The economic and sociological work of Joseph Schumpeter has been widely appreciated as inspiration for both economic sociology and evolutionary economics. The latter focuses on technological innovation and competitive market selection as features of modern capitalism, perceived as an evolutionary process of novelty-driven turmoil that drives adaptive socio-economic changes. This is not to say that Schumpeterian ideas on innovation have not become prominent in economic theories of growth and development, which are closer to the mainstream paradigm of neoclassical models of optimization in market competition (Aghion et al., 2021). Yet, evolutionary economics deviates from neoclassical optimization and efficiency considerations as the interplay of economic, social and political forces in the generation, selection and diffusion of innovations is taken to the fore under more realistic ontological conditions of bounded rationality and knowledge asymmetry (Hodgson, 2007). The constituent features of this evolutionary approach highlight a vision of economic evolution that addresses institutional variety, technological innovation and mechanisms of change and coordination. Evolutionary models explore learning and discovery processes in the search for innovations, allowing for error and imperfection, subject to selection mechanisms. Differences from Schumpeter’s original approach involve a more diverse perception of innovation, allowing for both radical and gradual change, accompanied by the key concern with knowledge as strategic resource and learning as competitive capability (Dosi, 1990: 337–338, 2023). Since the seminal contribution by Richard Nelson and Sidney Winter, evolutionary economics has presented itself with a distinctly Post-Schumpeterian flavour that combines a micro-analytical interest in the organization of technological innovation in firms with a macro-analytical interest in the impact of technological innovation on industrial change and economic growth (Almudi and Fatas-Villafranca, 2024).

When it comes to metaphors and analogies from biology, the evolutionary processes of variety, selection and retention in the economy is commonly associated with the Darwinian account of evolutionary change in biology, although the actual status of Darwinian concepts applied to economic affairs has remained subject to controversies which reach back to Schumpeter’s distanced view of evolutionary biology (Yoguel and Robert, 2024). According to Richard Nelson (2007: 33), economic evolution is part of human cultural evolution, which differs from biological evolution, because of the purposeful character of human action. In the context of firms, innovation results both from chance events as well as from the specific routines for problem-solving that represent conditions upon which the organizational capability for innovation rests as an unpredictable phenomenon (Nelson and Winter, 1982: 128–129). Accordingly, cumulative causation and critical mass play a major role in explaining the genesis and impact of innovation (Dopfer, 1994; Hanusch and Pyka, 2007; Witt, 1993). Therefore, the notion of economic evolution should not contain an unqualified notion of optimality or progress (Nelson, 1995: 57–58; Nelson and Winter, 2002: 37–38).

Resembling behaviourist positions, these variations of evolutionary economic reasoning maintain that norms and routines are guiding factors of action. Based on these behavioural aspects, the exploration of the internal factors of economic evolution goes beyond the Schumpeterian concern with radical innovation and then industrial turmoil it instigates. Rather, the search and satisficing schemes of firms are considered the decisive organizational terrain of innovation and evolution. In this way, Schumpeter’s emphasis on epochal innovations as drivers of long cycles of economic evolution is augmented by a more differentiated concern with different intensities of innovation (Nelson and Winter, 1982: 3–4). Bounded rationality, local knowledge and adaptive learning inform organizational routines of innovating firms. In this way, the evolutionary account is meant to confront neoclassical equilibrium models that refer to on an optimization calculus of seemingly all-knowing entities (Nelson and Winter, 2002). At the same time, these routines indicate sociological aspects, as they reflect patterned habits of social interaction based on commonly shared norms, standards and practices (Nelson and Sampat, 2001: 40).

In view of these institutional underpinnings of innovation, Post-Schumpeterian discussions in evolutionary economics highlight the systemic institutional and organizational fabric of innovation, in particular by theoretically conceptualizing and empirically exploring national and regional innovation systems (Chaminade et al., 2018). The impact of systemic models informed this perspective to sort out more effective models and practices of innovation policy (Godin, 2020: 74–92). An innovation system comprises networks of private and public sector institutions whose activities and interactions initiate, import, modify and diffuse new technologies. In addition to inter-company forms of cooperation, the network interactions between companies, research institutions, universities, educational institutions and financial institutions are considered, framed by the regulatory functions of the legal and political system. Ultimately, the performance of innovation systems depends on the question whether their respective governance structures are designed in such a way that they combine private and public goods in an effective and flexible manner (Lundvall et al., 2002: 222). Most appropriately, the conceptual framing of this perspective refers ever more strongly to institutional and technological learning processes in the evolving knowledge society. Sustainable economic growth with corresponding income and employment effects should therefore be realized primarily by promoting the learning and innovation skills of companies that are embedded in a cooperative social environment which combines technological change with social cohesion (Lundvall, 2007: 96–97). The matter of the knowledge economy thus becomes reinterpreted in terms of an evolutionary concern with knowledge flows that drive systemic processes of innovation (Malerba and McKelvey, 2020).

In fact, this evolutionary perspective reiterates the Schumpeterian views on the role of the state and public policy in the legal construction as well as the political legitimization of markets by governing its disruptive social implications that are most commonly observable when private and public sector actors join forces in the generation and diffusion of innovation (Ebner, 2006a). In this manner, the social and political rules and norms of the capitalist market system shape its allocative as well as transformative capacity over time, in doing so combining uncertainty-inducing innovation with uncertainty-reducing order (Harvey and Metcalfe, 2010: 82–84). The co-evolution of states and markets is therefore a key proposition in evolutionary economics, highlighting both the promotion of technological innovation and the concurring institutional adaptation in the evolutionary dynamism of modern capitalism (Nelson, 2002; Nelson, 2008: 271).

Perhaps the area of most extensive intersections and complementarities between evolutionary economics and economic sociology is to be traced in the domain of innovation studies. Indeed, according to programmatic statements by Richard Swedberg (2004: 327), the matter of technological change and its role in economic affairs belongs to the key research challenges in economic sociology that require further scrutiny. It is especially here, where the matter of innovation as driver of capitalist evolution might be elaborated on by proceeding with transdisciplinary efforts regarding the understanding of economic actors, their actions, the social structures they are enmeshed in and the systemic impact of their institutional environment in the capitalist economy. Of course, pioneering elaborations on these affairs have been made available decades. First and foremost, the monumental work of Manuel Castells (2000) on the rise of the information age in economy, society and culture stands for an approach that combines Post-Schumpeterian concerns with information and communication technologies as revolutionary techno-economic paradigm with a wide-ranging analysis of the knowledge-based patterns of interaction in the generation and diffusion of particular innovations. Nonetheless, Castells’ extensive theoretical and empirical work about ‘informationalism’ with its framework of power, labour, networks and knowledge in the evolution of informational capitalism has not been utilized yet as a potential bridge between the distinct domains of evolutionary economics and economic sociology (Duff, 2023). This may be due to its macro-analytical emphasis on socio-cultural adaptations to the new mode of production in the knowledge-based economy.

Curiously, however, the intellectual proximity between evolutionary economics and economic sociology seems to be so obvious that the chapter on technology and innovation in the leading handbook on economic sociology was actually provided by evolutionary economist Giovanni Dosi et al. (2005). They make the argument that evolutionary economics and economic sociology share overlapping perspectives regarding the fabrics and changes of technology and economy at large, involving the micro foundations of the action patterns of heterogeneous agents, based on bounded rationality, diverse learning patterns and diverse behavioural regularities. From this shared model of economic agents follows a likewise shared perception of the social embeddedness of technological change (Dosi et al., 2005: 678). In rejecting both technological determinism and social constructivism, a social shaping of technology takes place – with diverse actors from private and public sector intervening in the technological logics at hand on the grounds of competitive market forces, organized social interests and related political strategies (Dosi et al., 2005: 692). Also, accentuating once again the evolutionary perspective in economic sociology, the corresponding chapter on firms and entrepreneurs in the same handbook has been dedicated to organizational ecology as a genuinely evolutionary perspective on the genesis and diffusion of new firms and industries (Davis, 2005).

Not at last due to the common Schumpeterian intellectual legacy, economic sociology shares this assessment of evolutionary economics according to which technological innovation is a key characteristic of the economic and social dynamics of modern capitalism. Indeed, the drive for novelty under conditions of capitalist modernity has been a major theme already in the classical contributions of Marx and Weber – next to Schumpeter – among others, who defined modern capitalism as a historically unique economic system that persistently revolutionizes its technological structures and by doing so spreads instability and uncertainty. Nonetheless, while the conceptualization of innovation and economic change in evolutionary economics may benefit from sociological concerns with the interplay of agency and structures in struggles of domination, so current economic sociology may benefit from reconsidering an evolutionary understanding of the disruptive recombinations of economic and social relations that are addressed in Schumpeterian reasoning on the internal dynamics of capitalism.

Innovation and evolution in economic sociology: towards a Schumpeterian synthesis?

Paralleling the intellectual formation of evolutionary economics, economic sociology addresses the social fabric of capitalist market economies by analysing both the social motives and social structures underlying economic action. Modern economic sociology, just like evolutionary economics, evolved as a counter-position to neoclassical marginalism, yet it also received stimuli from advances in new institutional economics, which differs from neoclassical marginalism in accounting for bounded rationality and the diversity of governance mechanisms in economic organizations – as exemplified most prominently by the work of Oliver E. Williamson (2000). Indeed, during its formative phase, the so-called new economic sociology confined its conversation with economics largely to the field of the new institutional economics, in particular organizational analysis, whereas the conversation with evolutionary economics was largely neglected (Hodgson, 2023; Swedberg, 1990, 2004). This may have been due to normative problems in confronting Social Darwinist evolutionary naturalism – and despite Marx’s well documented references to the evolutionary thought of Darwin that seemed to sketch an intellectual trajectory that was not pursued any further (Hodgson, 2006: 11–12).

Yet a distinct trace of evolutionary concerns runs from Schumpeter’s evolutionary economic sociology to Talcott Parsons’ systemic approach to economic sociology that became dominant since the 1950s in US-American sociology and beyond. For Parsons, the evolutionary logic of his systems theory relied heavily on the concern with the functional logic of systemic adaptation to changing resource conditions. In this view, Schumpeterian entrepreneurship stood out as a key factor of economic life that would conceptually transcend the neoclassical notion of the utility-maximizing homo oeconomicus in favour of more complex sets of values and habits (Parsons and Smelser, 1956: 2–3). Parsons’ functionalist reasoning, however, which emphasized the adaptive capacity of capitalist market societies did not leave conceptual space for innovation as disruptive economic and social force. This systemic functionalism dominated sociology well into the 1970s, until it was replaced by critical concerns with the micro foundations of social systems. At this point, the ‘new’ economic sociology would come into play to provide genuinely sociological analyses of economic phenomena – with a key concern for the social conditionality of economic phenomena (Smelser and Swedberg, 2005). In this domain, Harrison White (1981) would speak of the formation of markets as an outcome of interconnected network relations – with producer markets as prime example, where firms would monitor their oligopolistic competitor’s signalling to achieve control over stabilized market structures. In this perspective, however, technological innovation as a disruptive evolutionary force is not considered as decisive analytical challenge that requires in-depth scrutiny. Instead, quite in line with Parsons’ structural functionalism, the emphasis of analysis is on the adaptive persistence of established social structures exercising control in markets and industries.

Following the ensuing intellectual trajectories of the ‘new’ economic sociology, it is possible to differentiate an interactionist line of reasoning that relates to Granovetter’s paradigmatic work on trust, knowledge and power in the social structures of networks as compared with a domination-oriented line of reasoning that highlights power and domination in institutional fields, combining Bourdieu’s ideas on the social structures of the economy with preceding traditions of organizational institutionalism. Crucially, despite overlapping analytical interests, both strands of current economic sociology exhibit a marked distance towards the Schumpeterian view on innovation and economic evolution.

Mark Granovetter has furthered the interactionist and relational research programme by highlighting the social embeddedness of economic action. This is meant to denote the idea that self-interested economic actors operate in inter-personal networks that are the backbones of social structures which follow a logic of reciprocity. They breed trust and channel information as they stabilize expectations as a condition of persistent interaction among economic actors (Granovetter, 1985). These network relations constitute the social fabric of market processes, which is framed furthermore by cultural and political logics in economic allocation and coordination (Granovetter, 2002: 36, 2005: 34–35). An interactionist point of departure for explorations into the Schumpeterian view of innovation and evolution refers to the creation of new opportunities by combining previously unconnected resources for new economic purposes. Innovation then resembles a distinct mode of assembling new projects that may involve the combination of actors and resources within as well as across social networks, in doing so contributing to the formation of new social structures (Granovetter, 2005: 46). This network dimension of innovation is illustrated by addressing the balancing of coupling and decoupling in the setting of social collectives such as ethnic groups and families that are engaged with entrepreneurial efforts in the promotion of new firms (Granovetter, 1995a, 1995b: 137, 142–143). This approach to the social structures of new firms has been expanded to address social networks in technological innovation. The definitive case of the knowledge, innovation and finance networks in California’s Silicon Valley has provided a most appropriate research object in that regard, for it represents the flow of knowledge in social networks that drive collective innovation efforts (Castilla et al., 2000). At this point, the interactionist vision of Granovetterian economic sociology with its emphasis on networks and strategic action in technological change clearly confronts major strands of evolutionary economics. It states that it is neither the efficiency canon of neoclassical economics nor the evolutionary concern with path dependency through chance events and critical mass effects that would shape technological change in capitalist economies, but social relations driven by self-interest, trust and also power – as outlined in economic sociology (Granovetter, 2017: 1–25).

Corresponding debates in the economic sociology of capitalism have highlighted broader concerns with comparative institutional analysis that aim at both social structures and economic institutions as primary fields of analysis (Swedberg, 2005: 6). Richard Swedberg’s contributions, in particular, which explicitly aim at reviving the Schumpeterian idea of economic sociology, highlight sociological approaches to entrepreneurship, innovation and evolution. In line with Schumpeterian ideas, innovation is viewed in terms of all the actors who are involved in the building of organizations and networks (Swedberg, 2000). In this way, Schumpeterian entrepreneurship resembles a distributed activity in a combinatorial process that can be carried out by diverse individuals, groups and organizations in a specific actor constellation (Swedberg, 2008a: 195–196). This perspective suggests that innovation is about replacing an established social order with a new one, which can be perceived in Weberian terms as an institutional paradigm that communicates a prescription for how to act in terms of habits, norms and rules (Swedberg, 2008a: 201). The latter kind of reasoning resonates with the ‘new materialism’ of science and technology studies that highlights materiality in the analysis of the interplay of interests, ideas and social structures shaping technologies (Swedberg, 2008b). These efforts at integrating Schumpeterian and evolutionary ideas may provide a promising way forward, although they still lack a specification of the actual social processes of innovation that reflect the actual social struggles over the domination of firms, industries and markets in terms of the Schumpeterian notion of ‘creative destruction’. Such a perspective needs to account for both interaction and conflict in the carrying out of innovation as evolutionary force.

A most accentuated alternative to the interactionist network paradigm in economic sociology can be traced in the work of Pierre Bourdieu on the social structures of the economy. This perspective pinpoints the political and legal construction of markets as institutional fields in resource struggles over power and domination (Bourdieu, 2005a). Bourdieu’s (2005b: 77–78) criticism of Granovetter’s embeddedness approach has denounced the latter as an ‘interactionist vision’ that ignores the structural aspects of industries and markets as fields of economic forces asymmetrically exercising power based on their distinct interests and their strategic position in the field. While Bourdieu has refrained from exploring the matter of innovation and evolution any further, parallel efforts in this regard have been undertaken in the domain of organizational institutionalism. In a programmatic statement on the corresponding research perspectives of the new institutionalism in organization studies, Paul DiMaggio (1998: 699–700) has suggested that evolutionary reasoning on institutional change provides most promising options for transdisciplinary cooperation, especially concerning the selective function of market competition and its regulation. Related studies have combined networks as means of knowledge transmission with organizational fields as terrains of innovation (Powell, 2001). Here, overlapping interests with evolutionary economic network research become obvious (Morlacchi, 2007). The ensuing research has attempted to overcome the stability bias of institutionalist reasoning in favour of more dynamic and even evolutionary accounts of change in industries and markets. Nonetheless, the matter of innovation still refers largely to institutional adaptations, and not to the Schumpeterian vision of disruptive change by radical innovations (Greenwood et al., 2017).

Further advances in the economic sociology of firms, industries and markets can be found in the work of Neil Fligstein (2002: 66–69), confronting the static concerns of Pareto optimality in resource allocation with the evolutionary survival and control of market organizations. Market actors support specific governance structures for the control of competition. Corresponding efforts in establishing discursive frames for the interpretation and legitimization of the underlying control strategies contribute decisively to the evolution of markets as socially constructed organizational fields. The formation of markets historically co-evolves with state-building, as reflected in the establishment of market institutions such as property rights (Fligstein, 1996: 660–662). However, in a crucial difference from evolutionary economics, this perspective puts less emphasis on internal mechanisms of innovation as it predominantly investigates the persistence of social structures in firms, industries and markets as represented in institutional orders that allow for the control of market dynamics. Thus, the analytical emphasis remains staunchly on issues of control that seem to fit the power logic of well-structured oligopolistic markets as distinct from the competitive upheaval that can be found in the evolutionary ‘gales of creative destruction’ addressed by Schumpeter. Accordingly, Fligstein claims that instability and crisis in markets stem from reproductive failures of incumbent firms, while market transformations are commonly brought about by external forces. Innovations resemble ‘invasions’ by other firms from nearby markets, paralleled by demand shifts and governmental interventions. The analytical focus of these efforts is thus foremostly on the stabilization and maintenance of established social structures (Fligstein, 1996).

A more promising concern with the evolutionary understanding of innovation is addressed in organizational ecology. As the diversity of organizational forms in markets stands for an evolving social system, so an evolutionary approach to market organizations addresses institutional variation through the introduction of new organizations. Adaptation to changing environments is facilitated by entrepreneurial interventions of the founders of new firms while selection operates through organizational success or failure, which relates to retention through imitation. In this context, selection follows not only a rationale of competitive efficiency, but also involves cultural fitness and institutional legitimation (Aldrich and Martinez, 2001; Hannan, 2005). However, in this evolutionary account of the economic sociology of firms, industries, and markets, the emphasis on the ecology of new organizations remains largely void of the domination problems accompanying disruptive innovation that characterize the Schumpeterian view of innovation and evolution. In this way, the already established segments of evolutionary reasoning in economic sociology may provide fruitful motives for further interchanges with Post-Schumpeterian evolutionary economics. A concern with agency and structures in social networks and institutional fields may serve as promising condition for exploring their disruption and recombination in the Schumpeterian ‘gales of creative destruction’ that characterize innovation in capitalist evolution. Given the urgency of current efforts at the ecological transformation of global capitalism, accompanied by the pressures of related grand societal challenges, such a Schumpeterian synthesis may be a most timely intellectual project.

Conclusion

Further advances of the economic sociology of innovation require focused explorations into the social conditions and constellations of technological innovation as drivers of the evolution of capitalist market economies. Such a Schumpeterian perspective differs from the domination-oriented concern with stability and control of fields, where innovation resembles an exogenously rooted disturbance. It also differs from the interaction-oriented concern with the formation of networks as means of knowledge transfer in the search for innovations. Innovation is a process that disrupts and destroys social relations while it is the breeding ground and societal laboratory for new social relations. Crucially, then, technological innovation implies the introduction of novelty in society, and this process drives most of the phenomena of instability, insecurity and uncertainty that characterize modern capitalism. An evolutionary economic sociology of innovation is predominantly concerned with the socially embedded modes of economic action of individuals and collectives in firms, clusters, industries and markets, which is meant to generate, introduce and diffuse technological innovation into the socio-economic setting of modern capitalism. Thus, while accounting for variation and diversity, it highlights the economic logic that is commonly underlying all processes of innovation under capitalist conditions, namely the logic of profit, property and competition that inform the disruptive innovations at hand. This point remains a core issue, although non-profit constellations such as schemes of open innovation are assessed as specific segments in a socio-economic setting that is otherwise dominated by capitalist logics (Ramella, 2019). Moreover, in view of the Global South, the misplaced focus on high-tech industries that is commonly associated with innovation in the Global North needs to be abolished. According to the late Calestous Juma (2011), a leading Post-Schumpeterian evolutionary development economist, the view of innovation as creative destruction applies to agricultural economies as well as to industrial and service economies. Thus, as in the case of India, it will be useful to sort out specificities in social priorities and local demands in the shaping of radical innovations: the wide of radical changes from the ‘Green Revolution’ in agrarian production all the way to the dissemination of digital technologies in knowledge-based services (Sharma, 2022).

Indeed, all these diverse domains of innovation may benefit from the adoption of a Schumpeterian perspective. The domination-oriented strand of economic sociology may provide further insights for the analysis of innovation in firms, industries and markets as fields of power and domination whereas the interactionist strand may highlight the underlying networks of interaction that are made, broken and remade in the Schumpeterian ‘gales of creative destruction’. A Schumpeterian orientation in both strands of economic sociology thus may provide a promising condition for pursuing a transdisciplinary conversation with evolutionary economics, based on a shared intellectual legacy and a complementary pluralist methodology in the analysis of capitalism as innovation-driven economic system.