When old technologies succumb to new creative ideas, competition thrives, innovation increases, the economy grows, and consumers benefit. In 1942, Joseph Schumpeter referred to this as the “gale of creative destruction” and deemed it the engine of sustained economic and technological progress.
Research: When Companies Cozy Up to Politicians, the Economy Suffers
Political connections are bad for competition.
April 05, 2019
Summary.
In a recent study, researchers try to understand how widespread such political connections are and how they affect firm dynamics, market competition, innovation, and the overall productivity of the economy. Politically-connected firms are more likely to survive in the market and to grow in terms of revenue and employment. These benefits are larger the more powerful the politician the firm employs. However, this growth in size is not accompanied by the respective growth in firms’ productivity. And it has negative effects on the broader economy.