APPLICATION OF SCHUMPETER'S THEORY OF THE INNOVATION TO ECONOMIC DEVELOPMENT

This paper applies Schumpeter's theory of the business cycle, based on the original Schumpeterian model, to economic development in the United States during the period 1963 - 2010. The issue is examined from the perspective of various economic sectors, with a focus on the financial sector. Key concepts mentioned in the theory of the business cycle are quantified and then put into context with the development of the economy or selected region. Schumpeter mentioned five elements of innovation, which are quantified, performed primarily on the basis of submitted and accepted applications for new patents and utility design. The output of the analysis is an index which aggregates the individual elements of innovation. The results show that before an economic downturn in the sector, a significant increase in the output index is recorded.