The Third Answer: How Market-Creating Innovation Drives Economic Growth and Development

Abstract

In this essay, we begin by offering a definition and two examples of market creating innovation that provide a foundation for the historically informed theory that follows. With this definition and the examples in mind, we next assess the two dominant theories of development— essentially, the currently dominant answers to the centuries-old question of why some countries prosper while others do not. We propose that market creating innovation constitutes a "third answer to this question. We then assess how new influences such as Blockchain technology and emerging business models relate to market-creating innovation, institutional evolution, and, ultimately, economic development. We offer specific examples of how Blockchain technology is being deployed to support market-creating innovation. We conclude by considering how a better understanding of the drivers of development prompts us to reconsider the definition of development itself.

Keywords: development, market creating innovation, blockchain, entrepreneurship

JEL Classification: D20, M13, O12, O30, O33