THE Schumpeterian notion of ‘creative destruction’ remains one of the most fascinating truths of modern economics. It encapsulates the idea that progress in industrial economies is not linear but cyclical, driven by the continual dismantling of the old to make way for the new. Outdated processes, business models and even entire industries are inevitably replaced by more efficient, more adaptive and more effective alternatives. This destruction of the old order becomes, paradoxically, the lifeblood of growth and renewal.
Yet, Joseph Schumpeter’s thesis, while compelling, leaves one central question unanswered: what motivates this shift? In emerging economies, the reasons behind creative destruction often stem from a complex interplay of social, economic and psychological forces; each influencing innovation in distinct ways.
Among these motivations are the losses incurred from inefficient ventures and obsolete technology, the pursuit of new and more attractive niches and the innovators’ dilemma, in which established firms focus excessively on serving existing customers and neglect emerging markets, leaving room for disruptive entrants. Innovation can also be sparked by ongoing research, by the transfer of technology from academia to industry, or by natural and environmental changes that compel human adaptation.
Consumer aspirations, developmental ambitions of emerging societies, the entrepreneurial ‘push’ created by necessity and external shocks, all further drive transformation. Positive and negative externalities, as well as exogenous events such as global crises or economic shocks, push firms to alter their models, adopt technology-driven solutions and rethink traditional methods. Underpinning all these is the psychological drive for success, the ‘need for achievement’ outlined by McClelland, which propels individuals to innovate, challenge limitations and create new pathways for growth.
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Missing links in Schumpeter’s vision
UNDERSTANDING creative destruction thus requires understanding its catalysts. Schumpeter identified entrepreneurial ambition, competitive drive, and the pursuit of profit as key motivators for innovation. But his framework did not account for the broader realities of modern economies. The effects of academic entrepreneurship, developmental imperatives, institutional weaknesses and global disruptions, such as the Covid-19 pandemic were absent from his analysis.
These missing elements have become crucial in emerging economies like Bangladesh, where innovation increasingly arises not only from market competition but also from survival, necessity, and collective adaptation. In such contexts, creative destruction is not merely a theoretical process; it is a daily reality shaping the nation’s economic trajectory.
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Political economy in transition
BANGLADESH’S ongoing economic turbulence stems largely from its failure to institutionalise an effective and sustainable democracy. Instead, the nation has been governed by a coalition of politically motivated elites — politicians, businessmen, bureaucrats and opportunists — whose priorities often lie in personal enrichment rather than national welfare. This oligarchic capture of the state and economy has generated inefficiency, lawlessness and the erosion of accountability.
Businesses that once thrived on serving a narrow class of the affluent elite became complicit in maintaining an illusion of prosperity. They relied on limited trickle-down effects to create the appearance of economic stability while ignoring the long-term imperatives of sustainability and inclusiveness. When that illusion finally collapsed, demand weakened, investment faltered and the government was forced to implement contractionary but necessary economic measures.
These shifts have forced both public and private actors to confront uncomfortable truths. For businesses, survival now depends on adopting efficient technologies, rethinking operational models, and fostering an innovation-friendly culture. For the state, the challenge lies in enabling structural reform, enhancing governance and cultivating the ecosystem necessary for creative destruction to flourish productively rather than chaotically.
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Rise of new innovators
DESPITE these challenges, 2025 has brought encouraging signs of renewal. The country witnessed a surge in startup funding, marked by a landmark $110 million merger and acquisition deal between ShopUp and Sary, bringing total startup investment to nearly $120 million, a staggering 1,116 per cent year-on-year increase. This made it Bangladesh’s second-largest deal after bKash’s SoftBank investment.
Startups are increasingly diversifying across artificial intelligence, agricultural technology, and business-to-business platforms, addressing both visible and latent consumer needs. Fintech has emerged as a major disruptor, extending financial inclusion to even the most marginalised groups. Low-income earners such as rickshaw pullers are now participants in the formal economy through digital finance.
The numbers tell a striking story. In 2024, bKash’s profits grew by 67 per cent, while conventional banks suffered an 18 per cent decline. Fintech accounts, now around 175 million, have overtaken traditional bank accounts at 153.5 million. This reflects the innovators’ dilemma in action, where established institutions, slow to adapt to emerging technologies, face the risk of obsolescence.
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Innovation in agritech and environment
THE agricultural sector, long a backbone of Bangladesh’s economy, is also undergoing a quiet revolution. The integration of artificial intelligence, Internet of Things solutions, and green technologies has increased crop yields by 30 to 40 per cent, reduced production costs, and conserved groundwater by up to 30 per cent. These advances not only strengthen food security but also align with global sustainability goals.
Crucially, these breakthroughs have been made possible through collaboration. Tri-partite partnerships between private firms, universities, and government bodies have created platforms for applied research and innovation. This synergy shows how cooperation between the state, academia, and the private sector can transform the broader economy and strengthen the innovation ecosystem.
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Technology transfer: next frontier
TECHNOLOGY transfer remains one of Bangladesh’s most underdeveloped yet promising areas of innovation. In advanced economies, Technology Transfer Offices serve as vital bridges between research and industry, ensuring that innovations reach the market. In Bangladesh, however, these mechanisms are still nascent.
Only a handful of universities, most notably the Bangladesh University of Engineering and Technology and the University of Dhaka, have established such offices, with BUET’s being relatively more effective. According to the Department of Patents, Designs and Trademarks, 12,768 patent applications were filed in 2023, of which just 5,046 were approved, a 7.2 per cent decline from the previous year. These figures reflect the limited culture of patenting and commercialisation in the country.
Nonetheless, the recent establishment of TTOs marks a crucial milestone. Expanding these into broader Knowledge Transfer Offices could create a more comprehensive platform for integrating research, innovation, and industry collaboration. In time, such institutional strengthening could lead to academic spin-offs, industrial innovation and the gradual emergence of a truly innovation-driven economy.
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Necessity, entrepreneurship and innovation
ENTREPRENEURSHIP in Bangladesh has grown at an unprecedented pace. A decade ago, the number of startups was under 100; by 2025, it has reached around 1,200. The country has climbed four positions to 79th in the Global Startup Ecosystem Index. The number of cottage, micro, small and medium enterprises has increased from 7.81 million in 2013 to 11.8 million in 2024.
One of the strongest drivers behind this surge is the rise in graduate unemployment, now at 13.5 per cent. For many young people, entrepreneurship has become not a choice but a necessity. Yet this ‘survival push’ has birthed a generation of innovators whose creativity is reshaping industries. The old proverb that ‘necessity is the mother of invention’ could hardly be more apt in describing Bangladesh’s entrepreneurial awakening.
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Crisis as a catalyst
EXTERNAL shocks and global crises have also played a defining role in accelerating innovation. The Covid-19 pandemic forced virtually every business in Bangladesh to rethink its operations. Companies were compelled to adopt hybrid working models, digitise their services and rely on third-party software solutions. This abrupt transformation fuelled demand for software-as-a-service providers and normalised technological adoption across industries.
These disruptions highlight an essential truth: both positive and negative externalities can serve as powerful catalysts for creative destruction. Innovation often emerges not from comfort, but from crisis, from the need to adapt swiftly in order to survive.
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Drive for achievement
AT THE individual level, the human drive for success remains one of the most potent sources of innovation. McClelland’s need-for-achievement theory captures this spirit perfectly. High-achieving individuals thrive on challenge, seek constructive feedback and take personal responsibility for outcomes. In Bangladesh, such individuals have become the face of the nation’s innovative energy.
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Towards innovation-driven future
IN CLOSING, while the Nobel recognition of creative destruction underscores its importance to economic development, it is equally vital to examine how this process unfolds in emerging economies. Bangladesh offers a compelling case study. Here, innovation is not merely a product of competition but a complex response to social necessity, economic constraint, and personal ambition.
Understanding these forces allows us to see creative destruction not as a disruptive threat but as a transformative force, one capable of reshaping industries, renewing institutions, and ultimately guiding Bangladesh toward a more resilient, inclusive and innovation-driven future.
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Md Kamrul Bari is an affiliate assistant professor and Dr Md Aynul Hoque is an assistant professor at the faculty of business and management of UCSI University, Bangladesh Branch Campus.