Quantifying Creative Destruction: Entrepreneurship and Productivity in New Zealand

Creative destruction “revolutionises the economic structure from within”, Joseph Schumpeter famously said, “incessantly destroying the old one, incessantly creating a new one”. Innovation in business – bringing new goods, new markets, new methods of production, new ways of organising firms – is the “fundamental impulse that sets and keeps the capitalist engine in motion” (Schumpeter, 1975, p. 83). Does the economy have enough flexibility? Are there barriers in the way of entrepreneurship? This paper develops a framework for quantifying creative destruction.