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Creative Destruction and Firm-Specific Performance Heterogeneity

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Author Info
Hyunbae Chun
Jung-Wook Kim
Randall Morck
Bernard Yeung

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Abstract

Traditional U.S. industries with higher firm-specific stock return and fundamentals performance heterogeneity use information technology (IT) more intensively and post faster productivity growth in the late 20th century. We argue that elevated firm performance heterogeneity mechanically reflects a wave of Schumpeter's (1912) creative destruction disrupting a wide swath of U.S. industries, with newly successful IT adopters unpredictably undermining established firms. This evidence validates endogenous growth theory models of creative destruction, such as Aghion and Howitt (1992); and suggests that recent findings of more elevated firm-specific performance variation in richer, faster growing countries with more transparent accounting, better financial systems, and more secure property rights might partly reflect more intensive creative destruction in those economies.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13011.

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Date of creation: Apr 2007
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Handle: RePEc:nbr:nberwo:13011

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Find related papers by JEL classification:
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
G3 - Financial Economics - - Corporate Finance and Governance
O3 - Economic Development, Technological Change, and Growth - - Technological Change
O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
O51 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada

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  1. Che, Natasha Xingyuan, 2009. "The great dissolution: organization capital and diverging volatility puzzle," MPRA Paper 13701, University Library of Munich, Germany. [Downloadable!]
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