Schumpeterian competition is a process of creating innovations that empower firms to gain a conclusive competitive advantage over their competitors. Two patterns of competition had been offered by Schumpeter. The earlier one (1934) is regularly denoted as the Mark I, whereas the later one (1950) is signified as the Mark II model of Schumpeterian competition. In the Mark I model; new firms bring innovations the matter that forces the less productive ones either to improve their productivity or to exit the market. In contrast, in the Mark II model, innovations are brought by incumbent firms rather than entrants. The discrepancy between Mark I and Mark II models of Schumpeterian competition has been utilized as a dichotomy for portraying the dynamics of industries. In other words, if the labor productivity growth had been decomposed into four effects: the selection component, the learning component, the entry, and the exit component; then Schumpeterian Mark I industries are characterized by a strong entry effect, but Schumpeterian Mark II industries are characterized by strong innovation one. During the period from 2010 to 2015, the annual average labor productivity growth in the Turkish manufacturing industries was positive. The innovation effect accounts for the bulk of the aggregate labor productivity growth in the Turkish manufacturing industries. Specifically, two-digit Turkish manufacturing industries during the period of (2010-2015) exemplify the Schumpeterian Mark II model of competition. The interpretation of such a result may be the innovative technological processes attained by implementing R&D activities that fuel the labor productivity growth in those sectors.
The Turkish economy was deeply integrated into the global economy during this period. However, Turkey’s manufacturing industries don’t enlarge competently enough. The firms engaged in violent competition stemming from trade liberalization the matter that compelled low-productivity manufacturing firms to exit the market and only the high-productive firms could survive. Labors released from these exiting firms usually move to either low-productivity service or informal sectors of the economy a matter that caused an inverse structural change. This can be interpreted by the negative selection impact in sectors such as tobacco products; coke and refined petroleum products; chemicals and chemical products; basic pharmaceutical products and pharmaceutical preparations; basic metals; electrical equipment; motor vehicles, trailers and semi-trailers and the industry of furniture. An inclusive promotion of the business environment should be executed to facilitate all firms to achieve higher productivity gains by improving the ineffectual regulations and encouraging the strategies of innovation incentives such as increasing the expenditure on R&D activities. Moreover, a coherent policy of flexicurity should be augmented to adjust the labor market to protect those influenced by structural change. Achieving faster productivity growth requires improving the quality of Turkey’s human capital via supportive education strategies and R&D activities. Furthermore, evolving management skills and productivity-boosting know-how practices enable escalating productivity gains “within” and “between” firms in the shorter term.
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