⏱️ Reading time: about 8 minutes – a quick deep dive into how “creative destruction” has evolved into “creative accumulation.”
Philippe Aghion, together with Joel Mokyr and Peter Howitt, won the Nobel prize in economics 2025. In their research, the laureates show that growth results almost entirely from technological progress. For them, innovation is the key to sustained growth, and increasing innovative capacities should be the priority for policymakers.
The foundation of this theory lies in the work of influential Austrian economist Joseph Schumpeter and his theory on innovation. In ‘A model of growth through creative destruction’, Aghion and Howitt (1992) directly reference Schumpeter and provide a formalised, quantitative growth model built on his ideas. But how certain really is the role of innovation in growth, who are the winners and losers, and what does this mean for social democracies?
For Schumpeter, creative destruction refers to the market exit (“destruction”) of existing firms caused by the activities of innovative firms. In every industry, innovators realise economic rents thanks to their advantage over imitators, who lag behind. Imitators must either catch up or be eliminated. As firms close the gap in innovative capabilities, they are again compelled to innovate further in order to gain a competitive advantage. This iterative process of innovation, imitation, and renewal is, in Schumpeterian economics, the driver of economic growth and innovation cycles.
Sometimes, however, this process of creative destruction happens within the incumbent innovators. Big corporations avail themselves of their financial resources to accumulate innovative capabilities through increased R&D spending. This widens the gap between innovators and imitators, slows the speed of imitation, and allows these big innovators to collect rents continuously. To an extent, this creative accumulation is a natural tendency within industries.
Aghion and Howitt’s influential paper anticipated what would unfold a decade later during the dot-com crisis. When the bubble burst in the early 2000s, investors pulled out from thousands of fragile tech start-ups, triggering a wave of bankruptcies that epitomised creative destruction: the market purged superficial innovation and rewarded the few firms that truly transformed the digital economy. Among the survivors were Amazon (founded in 1994) and Google (1998), whose breakthroughs laid the foundations of a new digital era. Their rise paved the way for a new generation of platforms such as Facebook (now Meta, founded in 2004), whose resilience and innovation redefined entire sectors of online commerce and communication. At the time, everything seemed to follow the logic of creative destruction described by Schumpeter and formalised by the recent Nobel laureates.
Yet as the digital economy matured, this pattern began to shift. Innovation was no longer destroyed across firms but increasingly within the same corporate groups. In the 2000s, platforms like Myspace were displaced by Facebook, and later by Instagram and TikTok – but instead of new challengers replacing incumbents, dominant firms absorbed them. Facebook’s acquisitions of Instagram and WhatsApp effectively internalised innovation, preserving its dominance and marking the transition from creative destruction to creative accumulation.
Weak intellectual property rights and antitrust enforcement further allowed these powerful innovators to consolidate their control over the market. The monopoly rents captured by the first generation of post–dot-com firms were indeed eroded by subsequent innovations – but increasingly, this “destruction” took place within the same corporate umbrellas rather than between independent competitors. A telling example is Facebook’s own evolution: its original Messenger platform was gradually supplanted by WhatsApp, a company it had previously acquired.
The Case of Amazon: Avoiding Destruction via Monopoly Power
In fact, innovation did not always thrive through fair competition or superior value creation. Many, indeed, relied on practices that limited competition and reinforced their market dominance. Amazon, for example, survived the dot-com crisis thanks to its genuine innovations in automation and its direct partnerships with manufacturers. However, in the years that followed, the company increasingly adopted monopolistic strategies designed to prevent other firms from eroding its rents – precisely the opposite dynamic of what Aghion et al. would anticipate in a process of creative destruction.
A striking example of Amazon’s monopolistic behaviour was Diapers.com. Between 2008 and 2009, the small start-up grew rapidly by identifying an untapped market for selling diapers online and soon expanded into other essentials like toothpaste and shampoo. Seeing this as a threat to its own rents, Amazon first tried to buy the company. When the offer was rejected, it launched “Amazon Mom”, a massive price war selling essentials far below cost. With its deep pockets, Amazon could afford to wait until Diapers.com was forced to sell for a fraction of its value. Once absorbed, Amazon quietly raised prices again.
Amazon quickly learned to internalise innovation. After Netflix transformed entertainment with home streaming, Amazon launched Prime Video, bundling films with free delivery to boost loyalty. The model expanded to music, discounts, and other services, creating a powerful ecosystem that kept users locked in. Soon after came the Kindle, offering a paper-like reading experience that reshaped the book market and drove many traditional bookstores out of business.
In 2012, it bought Kiva Systems and integrated warehouse robots to speed up deliveries, gradually replacing human labour. It acquired The Washington Post, introduced Alexa, invested in Blue Origin for space exploration, and entered the grocery market by buying Whole Foods Market. Soon after, it launched Amazon Go, a cashierless store where customers scan items and pay through the app. Entirely automated, these stores give Amazon unprecedented access to detailed data on consumer habits and purchasing frequency.
In fact, Amazon is a prime example of what innovation scholars like Cecilia Rikap, Associate Professor at UCL and researcher at Argentina’s CONICET, describes as Intellectual Monopoly Capitalism. As Rikap and her co-authors argue, particularly in the case of Big Tech and Pharma, these corporations have moved beyond Schumpeter´s traditional innovation paradigm. Through the consolidation of global value chains, the modulation of innovation-related risks and the monopolisation of platform solutions, leading corporations manage to outsource the innovation to start-ups, yet still capture a significant share of the resulting rents (Rikap, 2024).
This process could be described as creative appropriation, a departure from the classical pattern of creative destruction. These monopolising dynamics enable dominant corporations to shape both the direction and pace of innovation, reinforcing their control over technological change.
Contrary to the rent destruction envisioned by the Nobel laureates, Amazon now seeks to dominate nearly every sector of the economy. When a product succeeds, it quickly copies and sells it under its own brand, using its vast infrastructure to undercut rivals. This concentration risks turning Amazon into a universal retailer – an economy within the economy. Such dominance threatens competition, limits innovation, and could ultimately weaken aggregate demand.
Public regulation is crucial to prevent such practices. In 2020, the EU sued Amazon for using sellers’ data to copy products and promote its own, forcing the company to limit the practice. In 2022, California sued Amazon for banning sellers from offering lower prices elsewhere. A year later, the U.S. Federal Trade Commission and 17 states accused it of illegally maintaining monopoly power. These actions show that regulation is vital – but arrived late, after Amazon had already amassed vast economic and political power.
While this dynamic feels new in the digital age, history offers a clear precedent. In the early 20th century, Standard Oil controlled about 90% of the U.S. oil market, using its dominance to crush rivals and manipulate prices. The U.S. government ultimately broke it up into 34 companies to restore competition – a reminder that unchecked concentration has long required decisive state action.
Today’s political and fiscal systems often reinforce these practices and promote massive wealth accumulation. Amazon exploits deductions, tax credits for innovation, and losses from previous years to minimise its effective tax rate – resulting in a tax bill widely viewed as disproportionately low – read also our blog on How Bezos Became One of the World’s Richest Men.
From Creative Appropriation to Creative Accumulation
In a more recent work, Aghion, more than thirty years after formulating his model of creative destruction, warns of a critical consequence of weak market regulation: unchecked innovation can reinforce inequality and lead to the concentration of both wealth and power – a trend deeply harmful to society. He cautions that without constant regulation, a handful of firms could achieve global dominance. Today, such wealth accumulation is no longer a theoretical risk but an observable reality. By 2025, Jeff Bezos, founder of Amazon, had amassed an estimated net worth of around $230 billion, making him the fourth richest individual in the world, according to Forbes. Such extreme wealth concentration vividly illustrates how creative destruction has evolved into creative accumulation via not competition but enduring corporate and personal dominance.
To safeguard innovation and democracy alike, stronger progressive taxation and competition policies are essential to curb excessive concentration and ensure open, dynamic markets. As the Nobel laureates themselves concluded:
“Policy should encourage innovation while ensuring that yesterday’s innovators do not use their rents to deter new entrants, thereby undermining productivity growth, social mobility, and equality. This requires a combination of regulation, progressive taxation, and enlightened competition policy.”
– Aghion and Griffith, 2025
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