The difference, however, was Schumpeter's resurrection of Smith's concern with the entrepreneur as an innovator who improved growth by efficiently combining resources, adopting new technical improvements in machinery and conducting the division of labor. Schumpeter's starting point is the steady state, or rather, a smoothly expanding economy. Unlike Smith, his population growth was exogenous and his savings rate rather constant or, at best, a residual and not a driver of growth - he was not very much concerned with distribution. It only takes a few leaders. From a steady economy, a technical innovation by a single entrepreneur opens up new profitable avenues - therefore, more entrepreneurs are induced to innovate, thereby increasing the profits in the economy as a whole, thereby driving growth.
Profits begin to decline and the economy slows down.
However, the decline in profits will eventually, again, induce those with entrepreneurial inclinations to once again innovate. One may think of this as more of a cycle theory than a growth theory, but Schumpeter claimed that there were ratchet effects in innovation so that entrepreneurial-driven spurts of economic activity led to progressively higher levels of income. Like Wicksell, Schumpeter abandoned Say's Law and claimed that credit made present activity independent of past activity and thus enabled entrepreneurship. Hence, since entrepreneurial innovation could be arrested by lack of credit, then financial innovation was also an important factor for increasing growth. Although he did not have diminishing returns to innovation, Schumpeter did have long-run elements in his theory that induced a breakdown in growth.