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Technology Stocks : Deswell Industries (DSWL)
DSWL 3.390-0.3%Nov 7 9:30 AM EST
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To: Ron Bower who wrote (862)8/2/1998 1:57:00 PM
From: Shane M  Read Replies (1) of 1418
 
Ron,

Regarding Schumpeter. He's a fairly well known economist, but I can't find reference to a "Schumpeter effect" in my economics books. Here's what I could find:

In a market structures book I have, he proposes that market structure might causally be related to innovation, and argues that monopolistic firms (firms with market power), instead of being staid and lazy, are insulated from competition and are therefore more likely to innovate because the risks are lower.

In the context of business failures, Schumpeter has an argument along the lines of the "Gorilla Game". The spoils of victory in the marketplace often accrue to a few winners, and may be many multiples of the costs of defeat. (i.e. the company that wins among many losers sees its investments and returns on capital perform at incredible rates, while the losers go out of business). I think the tendency here would be to overrate the chance of success, because the payoff could be enormous. Similar to a lottery psychology. Might this be the effect you mention?

How this applies to the mentioned context (or if this is even the effect you refer to) I am unsure. Let me know if this fits your scenario. If so, it would seem an economic "bust" is being predicted for U.S. companies.

Shane
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