Institutions, Firms and Consumers' Choice: Extending Neoschumpeterian Competition to Consumption

The notion of neoschumpeterian competition can be combined to insights from institutional economics in order to help explain consumers' decision-making. Competition is a selective process whereby firms are led to create, re-shape or increase advantages toward other firms in a market-a loosely organized set of institutions with a large number of selective exchange goods. In a complex consumption environment, those institutions simplify, codify, and transmit information to consumers that use particular cognitive abilities and habits of thought to interpret it and thus make reasonable choices In this view, firms' competitive advantages intertwine with market institutions. A firm promotes "upward causation" when it moulds such interaction to its favor, promoting changes in consumers' desires, goals, and preferences. Hence, innovation in the form of a new product in the market is just part of a bigger process in which consumers' perceptions and preferences concerning the usefulness and representation of products are also essential.