The role of innovation and the mechanism of "creative destruction" for economic growth is the common thread of the 2025 Nobel Prize in Economics. For the business world, the award resonates a valuable lesson that investment in research and product innovation is a weapon against the inevitability of change. Are Indonesian entrepreneurs ready to do so?
From Stockholm, the Swedish Academy announced the award of the 2025 Sveriges Riksbank Prize in Economic Sciences (also known as the Nobel Prize in Economics) on Monday (13/10/2025) local time. Two US and UK professors, Joel Mokyr and Peter Howitt, and one French professor, Philippe Aghion, were named as recipients of the prestigious prize, which has been awarded annually since 1968.
In a written statement, the Swedish Academy chose Mokyr for his scholarly contributions that use historical sources to reveal the origins of sustained economic growth as the new normal since the industrial revolution began.
"Mokyr clearly demonstrates that, with continuous innovation, we not only know that something works, but also why it works. He also emphasized the importance of society being open to new ideas that make change possible," wrote the Swedish Academy's Economics Committee, chaired by Stockholm University Professor of International Economics John Hassler.
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Meanwhile, the Swedish Academy also selected Aghion and Howitt as winners for their contribution in formulating a mathematical model that explains the mechanism of "creative destruction" in the article "A Model of Growth Through Creative Destruction" published in the journal Econometrica, Vol. 60, No. 2 (1992).
Aghion and Howitt describe "creative destruction" as occurring when new, better, innovative products outcompete companies that stick with old products. Innovation represents novelty and creativity, but at the same time is destructive and destroys old products naturally.
"In their own ways, the winners have shown that 'creative destruction' creates conflicts that must be managed constructively. Otherwise, large corporate interests and threatened groups can block innovations from being born," the statement concluded.
Create a whole ecosystem
Including innovation as an important item in business practices is a necessity for the business world. However, in the context of Indonesia, there is still homework to improve the business ecosystem and innovation ecosystem as a prerequisite for industrial innovation to run as expected, even though it takes a long time.
Chairman of the Indonesian Employers Association (Apindo) and CEO of Sintesa Group Shinta W. Kamdani stated that industrial innovation requires a supporting ecosystem that is holistic, dynamic, open, and collaborative. Efforts to improve the business ecosystem and innovation ecosystem simultaneously are needed to encourage the industry to innovate.
Shinta explained that there are at least three important aspects in improving the ecosystem, namely human resources, the business climate created by the government, and market absorption. In the first aspect, not only the quality of human resource output needs to be discussed, but also the quality of the education system that prepares these human resources.
"For example, the extent to which the education system provides incentives for R&D activities that sell commercially or R&D funding support in the education sector. In this case, pentahelix cooperation needs to be carried out so that these prerequisites can be met," said Shinta when contacted by SUAR, Tuesday (14/10/2025).
In the second aspect, the efficiency of the cost of doing business, regulatory openness to unprecedented goods/services, and protection of intellectual property rights against piracy and counterfeiting of innovative products are the keys that encourage the industry to innovate.
"Businesses will only conduct R&D if the output results in a commercially good return on investment . The government needs to create a regulatory climate that is not only efficient, but also open to innovation collaboration and firmly support healthy business competition," he said.
The effectiveness of an innovative product will only be tested if it is responsively accepted by the market. For this reason, the purchasing power of the public, especially the middle class, which is gradually increasing and stabilizing in terms of the number and nominal purchasing power, is an absolute requirement. This means that high demand will undoubtedly create a competitive market in terms of product innovation.
"Don't think that with R&D incentives or HR development incentives, industrial innovation will run by itself. Incentives help businesses, but they are only a small part of what is needed to make sustainable business innovation," concluded Shinta.
Sharing the same view as Shinta, President Director of Sahid Jaya International Hariyadi Sukamdani believes that innovation is a necessity for any business, even those that only sell basic products such as mineral water. However, the priority towards innovation is still not considered by most entrepreneurs.
"I see the tendency of entrepreneurs in Indonesia to buy ready-made innovation products rather than innovating to do their own research until they get a patent. The reason is that in addition to having to provide trial and error costs, the time to enter the commercial market is also uncertain," Hariyadi said when contacted, Tuesday (14/10/2025).
So far, according to Hariyadi, potential products that can be developed through investment in research and innovation are derivatives of palm oil products to increase added value beyond CPO exports. In addition to institutional support, the Palm Oil Plantation Fund Management Agency (BPDP) has funds for research.
Despite the lack of prioritization, Hariyadi is optimistic that entrepreneurs are starting to think about the importance of investing in research by funding or buying research produced by universities. This can be an alternative to developing a research and development department in the company itself.
"If we look at it as a whole, the amount is still small. In fact, if we look at it, investment in research has a large margin . It's just that entrepreneurs are impatient and choose to buy ready-made technology, whereas if they are serious, the added value of research products is great," he said.
The more relevant
In addition to providing lessons for the business world, the 2025 Nobel Prize in Economics also has a number of implicit messages about the world today. Atma Jaya Catholic University international finance lecturer Agustinus Prasetyantoko believes that although innovation as a source of economic growth has long been recognized, its relevance has been increasingly felt recently.
"Innovation is relevant because the world is facing stagnant growth due to complicated geopolitics so that domestic sources of growth will no longer drive growth. In addition, the AI revolution needs to be seen from the perspective of endogenous growth and the creative destruction process offered by the three 2025 Nobel laureates," Prasetyantoko explained to SUAR, Tuesday (14/10/2025).
The different nationalities of the three winners, according to Prasetyantoko, also means that the Nobel Committee is reaffirming the meaning of multilateralism cannot be rejected, even though it is currently approaching its death.
"Howitt strongly opposed Trump's policies, while Aghion suggested learning from China. Their victory thus represents a multilateral perspective that has been threatened of late," he said.
For Indonesia, the primacy of innovation as a driver of economic growth is an invitation for Indonesia to no longer rely on conventional natural resources such as minerals and coal, but to focus on value-added industries and improve the quality of human resources capable of "creative destruction".
"Beyond all that, there must be solid governance, regulations and institutions so that allocations to improve the economic order and system do not evaporate and fall into the hands of corruptors," Prasetyantoko added.
