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Risk, variety and volatility: growth, innovation and stock prices in early industry evolution

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  • Mariana Mazzucato

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Abstract

The paper studies the patterns of volatility in firm growth rates and stock prices during the early phase of the life-cycle of an old economy industry, the US automobile industry from 1900-1930, and a new economy industry, the US PC industry from 1974-2000. In both industries, firm growth rates are more volatile in the period in which innovation is the most “radical”. This is also the period in which stock prices are more volatile. The comparison sheds light on the co-evolution of industrial and financial volatility and the relationship between this co-evolution and mechanisms of Schumpetarian creative destruction. Results provide insight into the debate on whether the statistical behavior of firm growth rates is well represented by Gibrat’s Law. Copyright Springer-Verlag Berlin/Heidelberg 2003

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File URL: http://hdl.handle.net/10.1007/s00191-003-0167-7
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Bibliographic Info

Article provided by Springer in its journal Journal of Evolutionary Economics.

Volume (Year): 13 (2003)
Issue (Month): 5 (December)
Pages: 491-512

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Handle: RePEc:spr:joevec:v:13:y:2003:i:5:p:491-512

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Related research

Keywords: Growth rates; Stock prices; Innovation; Volatility;

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Cited by:
  1. J. Krafft & J. -L. Ravix, 2008. "Corporate Governance And The Governance Of Knowledge: Rethinking The Relationship In Terms Of Corporate Coherence," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 17(1-2), pages 79-95.
  2. Jackie Krafft & Jacques-Laurent Ravix, 2005. "The governance of innovative firms: an evolutionary approach," Post-Print hal-00203620, HAL.
  3. Mata, José & Woerter, Martin, 2013. "Risky innovation: The impact of internal and external R&D strategies upon the distribution of returns," Research Policy, Elsevier, vol. 42(2), pages 495-501.
  4. Alessandro Caiani & Antoine Godin & Stefano Lucarelli, 2012. "Innovation and Finance: An SFC Analysis of Great Surges of Development," Economics Working Paper Archive wp_733, Levy Economics Institute.
  5. Alessandro Caiani & Antoine Godin & Stefano Lucarelli, 2013. "Innovation and Finance: A Stock Flow Consistent Analysis of Great Surges of Development," INET Research Notes 34, Institute for New Economic Thinking (INET).

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