The Austrian School, based on the work of C. Menger, sees competition as a dynamic process of discovery, dominated by the figure of the entrepreneur. It is entrepreneurs who see the possibilities for making profits by producing new goods, or by producing existing goods in new ways. The competitive process involves the continual creation and subsequent elimination of opportunities for profit. Perhaps the best-known economist working in the Austrian tradition was J.A. Schumpeter. His vision was of competition as a process of 'creative destruction'.
Entrepreneurs discover new technologies, earning large profits as a result.
Over time their discoveries are imitated by others, with the result that competition forces profits down. This theory fits into a longer tradition of evolutionary theories of competition, whose history goes back to the social Darwinism of the late nineteenth century in which competition was seen as eliminating the unfit. Among the most prominent modern exponents of evolutionary theories of competition are R.R. Nelson and S.G. Winter, who combined the Austrian idea that entrepreneurs explore alternative ways of responding to novel situations with the Darwinian idea that those who make good choices survive, with competition eliminating those who make bad ones. The Austrian emphasis on innovation also results in a different attitude towards the role of numbers in competition. The standard view is that the smaller the number of firms, the less is the degree of competition.