Innovation has a locus.
The relevant unit is the product line and the firm that accumulates its own knowledge.
Professor of Economics · Duke University
Schumpeterian growth,
innovation, and the firm.
I study how firms accumulate knowledge, how industries organize innovation, and how those decisions become sustained economic growth.
Pietro F. PerettoMacroeconomics · Industrial organization · International trade
01Market size
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02Firm scale
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03Returns to innovation
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04Knowledge accumulation
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05Productivity growth
FeedbackEntry and product proliferationdivide the aggregate market among more firms
Growth depends on the scale of activity at the firm—not mechanically on the scale of the economy.
01 Research program
How does innovation by firms become sustained economic growth?
This question connects industrial organization and macroeconomics. Firms do not merely apply an economy-wide technology: they build knowledge, choose the direction of innovation, enter and exit markets, and organize the people who make innovation possible.
My work develops a tractable theory of that process. The same architecture explains why scale effects disappear, how economies take off from stagnation, why market structure evolves, and how policy, trade, resources, demography, and corporate governance shape growth.
OriginsIndustrial organization
Firm size, rivalry, fixed costs, entry, and the evolution of market structure.
EngineCreative accumulation
Incumbent firms build knowledge in house while new product lines reorganize the economy.
HistoryEndogenous takeoff
Development makes innovative firms viable, turning stagnation into sustained growth.
InstitutionsThe innovative firm
Ownership, managerial delegation, taxation, and governance determine innovative investment.
02 Selected contributions
The argument in five propositions.
Not a list of topics, but a cumulative account of how the capitalist engine of growth works.
Scale changes industrial structure.
A larger economy supports more firms. Product proliferation prevents population from mechanically raising long-run growth.
Development creates the innovative firm.
Firms must become large enough for in-house R&D—and later managerial delegation—to be profitable.
History shapes the transition.
Agriculture, trade, demography, resources, disease, and government affect when takeoff occurs and how economies diverge.
Organization belongs inside growth theory.
Corporate governance is the internal organization of the mechanism that turns knowledge into growth.
03 Books as synthesis
I
Knowledge, Industry, and the Endogenous Growth of Nations
Develops the firm-centered Schumpeterian framework: creative accumulation, endogenous market structure, competition, policy, resources, trade, heterogeneity, and turbulence.
II
Schumpeterian Growth Theory, the Great Acceleration, and the Great Divergence
Uses that framework to develop a theory of the history of growth: pre-industrial stagnation, endogenous takeoff, structural transformation, divergence, and the demographic transition.
View contents ↗04 Current work
Extending the program: selected recent papers.
All papers →
2026Current Account and Trade Balance Dynamics in a Schumpeterian Small Open Economywith Domenico Ferraro and Filippo MassariInnovation, valuation, and external positions↗
2026Cost Push and the Direction of Endogenous Innovation: Transportation, Regulation, and Scarcitywith Bentley Coffey and Patrick McLaughlinTransportation, regulation, scarcity, and the direction of innovationThis paper replaces the earlier version titled “Transportation, Innovation, and Growth,” which did not successfully distinguish its contribution from Kane and Peretto (2020). The present revision addresses that issue.↗
2025Incremental Innovation, Disruptive Innovation and Economic Growthwith Antonio MinnitiDominance cycles and industry dynamism↗
2025The Rise and Evolution of the Innovative Firmwith Domenico Ferraro and Maurizio IacopettaTechnology, market structure, and managerial incentives↗
05 Teaching
Economic growth, from foundations to research to teaching.
Courses at Duke University
For students and non-specialists
What is Schumpeterian growth theory?
In the old growth model, technological progress arrives as “manna from heaven,” shifting an aggregate production function. Here, growth is instead the outcome of firms spending resources to improve products and processes, entrepreneurs creating new markets, and institutions shaping the rewards to those decisions. Schumpeterian theory makes this process—its conflicts, transitions, and unintended consequences—the center of macroeconomics.