Nobel Prize Highlights Importance of Economics of Innovation

Philippe Aghion has been awarded the 2025 Nobel Prize in Economic Sciences, jointly with Peter Howitt and Joel Mokyr. Aghion has had close ties with ZEW for many years, attending conferences and most recently presenting his book “The Power of Creative Destruction: Economic Upheaval and the Wealth of Nations” at ZEW in 2021, for which he has now been honoured as well. Professor Hanna Hottenrott, head of the ZEW Research Unit “Economics of Innovation and Industrial Dynamics,” professor at the Technical University of Munich and member of the Scientific Advisory Board at the Federal Ministry for Economic Affairs and Energy, assesses the significance of the award-winning research achievements as follows:

“This year's prize underlines the greatly increased importance of innovation economics in the economic sciences. Innovation research is developing at a rapid pace and its concepts are becoming increasingly important for other fields.

The work of Philippe Aghion, Peter Howitt and Joel Mokyr builds on the work of the eminent economist Joseph Schumpeter, who coined the terms “innovative entrepreneur” and “creative destruction” in the early 20th century. With their outstanding theoretical and empirical work, the laureates have made a significant contribution to explaining how innovation drives technological progress and thus prosperity. The prize is also particularly well-deserved because the economists address the great complexity of the subject matter and the associated obstacles and social side effects of innovation, and because they have laid the foundation for a growing field of research.

The insights from the laureates’ research are highly relevant for Germany. We see the path dependencies in established technologies highlighted by Aghion and his co-authors, for example. Mokyr’s work demonstrates why it can be difficult – and socially as well as economically challenging – to break path dependencies and to make innovation-driven transformations socially acceptable.

Innovation economics research has a long and strong tradition at ZEW. Since the 1990s, the Research Unit “Economics of Innovation and Industrial Dynamics” has been successfully examining the drivers and effects of innovation and technological change. By collecting data, for example through company surveys and the analysis of invention applications, ZEW makes an important contribution to innovation research in German and European contexts. The topic also plays an important role in other research units, such as the “Environmental and Climate Economics” and “Digital Economy” Units. ZEW regularly evaluates innovation policy measures and provides evidence-based input into the design of European innovation policy.”