Theoretical Framework and Proposed Model

Setting out from the concept of “creative destruction” proposed by Schumpeter (1942), firms that are not innovative are replaced by those that are. An innovative firm is one that takes advantage of opportunities available in the surrounding environment, mobilizing both physical infrastructure and forms of demand-pull through new business which is intensive in incorporating knowledge, created by existing firms. To take advantage of those opportunities, both new and established firms must make additional investment in innovation in order to create new sources of spillovers.