This Element combines the advances of the economics of knowledge and innovation implementing the Schumpeterian notion of creative response to understand the determinants and the effects of the rate and direction of technological and organizational change and its variance across time and space, firms, and industries. The notion of creative response provides an inclusive framework that enables to highlight the crucial role of knowledge in assessing the rate and direction of technological change and to clarify that no innovation is possible without the generation of new knowledge, while the generation of new knowledge augments the chances of innovation but does not automatically yield the introduction of innovation. Firms thus are faced with several strategic decisions to make the creative response possible. The Element elaborates on the analytical core of the notion of creative response and articulates its implications for economic policy and strategic management.
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