The destruction phase of public sector innovation: regulations governing school closure in Australia

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The destruction phase of public sector innovation: regulations governing school closure in Australia Aaron M. Lane 1 # Springer-Verlag GmbH Germany, part of Springer Nature 2019

Abstract In the Schumpeterian conception, innovation is the "perennial gale of creative destruction" (Schumpeter 1976 [1942], p. 84). This evolutionary process consists of two entangled but distinct forces; the creation phase and the destruction phase. This insight has been applied to non-market production. However, studies in public sector innovation are almost exclusively focused on the creation phase. This paper presents a new way of identifying mechanisms for destruction in the public sector context by analyzing the regulatory framework governing service delivery. The study presents an analysis of the regulations governing school closure in Australia, which is supplemented with an historical case study. The study finds that Ministerial discretion is the sole mechanism of school closure. It is proposed that this method of analysis is capable of being applied to other public sector services. Overall, the implication from this analysis is that an understanding of regulatory constraints is fundamental to a Schumpeterian understanding of public sector innovation. Keywords Creative destruction . Public sector innovation . Public services . School closure

. Regulation JEL I28 . H75 . O38 . K23

1 Introduction Innovation has a destructive side. Joseph Schumpeter famously maintained that “the process of Creative Destruction is the essential fact about capitalism” (1976 [1942], p. 83). The key insight of this proposition is that economic progress and the process of innovation will unfold over time with new products and services, new methods of production, new sources of supply, new markets, and new organizational forms

* Aaron M. Lane [email protected]

1

Graduate School of Business and Law, RMIT University, Melbourne, Australia

A. M. Lane

displacing existing practices. The resources that are freed up in this evolutionary process can be redeployed for new productive uses – continuing the cycle. In the Schumpeterian tradition, innovation is understood as a dynamic force driving economic development. In this conception, innovation is more than just new ideas but rather the process of how novel ways of doing things are adopted and transform the existing landscape. Accordingly, economic decision making should not be analyzed in isolation but understood as part of the “perennial gale of creative destruction” (Schumpeter 1976 [1942], p. 84). ‘Creative destruction’ was originally conceptualized to explain the dynamics of private sector activity, but it can also be used as a lens to observe non-market production. It is understood that industry and product life cycles are evolutionary processes (e.g., Klepper and Graddy 1990; Segerstrom et al. 1990; Malerba and Orsenigo 1996; Klepper 1996). That is, "product markets typically undergo a life cycle of introduction, growth, maturity, and eventual decline" (Stadler 1991, p. 293). Much is known abo