Scale without mass: business process replication and industry dynamics
In the mid-1990s, productivity growth accelerated sharply in the U.S. economy. In this paper, we identify several other changes that have occurred during the same time and argue that they are consistent with an increased use of information technology (IT) in general and enterprise IT in particular. Case studies and econometric evidence demonstrate that IT has enabled firms to more rapidly replicate improved business processes throughout an organization, thereby not only increasing productivity but also market share and market value. We develop a simple model that shows how IT-enabled business process replication will also increase both turbulence and concentration at the industry level. We then document a substantial increase in turbulence starting in the 1990s, as measured by the average intra-industry rank change in sales, enterprise value, and other metrics. In particular, we find that IT-intensive industries account for most of this increase in turbulence, especially after 1996. In addition, we find that IT-intensive industries became more concentrated than non IT-intensive industries after 1996, reversing the previous trend. The combination of increased turbulence and concentration, especially among IT-intensive industries, is consistent with an increasingly Schumpeterian style of competition. We conclude that the improved ability of firms to replicate business innovations is linked not only to productivity increases, but also to changes in the nature of business competition itself.
Volume (Year): (2007)
Issue (Month): Nov ()
|Contact details of provider:|| Postal: |
Phone: (415) 974-2000
Fax: (415) 974-3333
Web page: http://www.frbsf.org/
More information through EDIRC
|Order Information:|| Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Diego Comin & Sunil Mulani, 2007.
"A theory of growth and volatility at the aggregate and firm level,"
Federal Reserve Bank of San Francisco, issue Nov.
- Comin, Diego & Mulani, Sunil, 2009. "A theory of growth and volatility at the aggregate and firm level," Journal of Monetary Economics, Elsevier, vol. 56(8), pages 1023-1042, November.
- Diego Comin & Sunil Mulani, 2005. "A Theory of Growth and Volatility at the Aggregate and Firm Level," NBER Working Papers 11503, National Bureau of Economic Research, Inc.
- Kevin J. Stiroh, 2002.
"Information Technology and the U.S. Productivity Revival: What Do the Industry Data Say?,"
American Economic Review,
American Economic Association, vol. 92(5), pages 1559-1576, December.
- Kevin J. Stiroh, 2001. "Information technology and the U.S. productivity revival: what do the industry data say?," Staff Reports 115, Federal Reserve Bank of New York.
- Erik Brynjolfsson & Lorin Hitt, 1996.
"Paradox Lost? Firm-Level Evidence on the Returns to Information Systems Spending,"
INFORMS, vol. 42(4), pages 541-558, April.
- Brynjolfsson, Erik. & Hitt, Lorin M., 1995. "Paradox lost? : firm-level evidence on the returns to information systems spending," Working papers 3786-95., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Paul M Romer, 1999.
"Endogenous Technological Change,"
Levine's Working Paper Archive
2135, David K. Levine.
- repec:tpr:qjecon:v:122:y:2007:i:4:p:1351-1408 is not listed on IDEAS
- Bloom, Nicholas & Van Reenen, John, 2006.
"Measuring and Explaining Management Practices Across Firms and Countries,"
CEPR Discussion Papers
5581, C.E.P.R. Discussion Papers.
- Nick Bloom & John Van Reenen, 2006. "Measuring and explaining management practices across firms and countries," LSE Research Online Documents on Economics 733, London School of Economics and Political Science, LSE Library.
- Nick Bloom & John Van Reenen, 2006. "Measuring and Explaining Management Practices Across Firms and Countries," CEP Discussion Papers dp0716, Centre for Economic Performance, LSE.
- Nick Bloom & John Van Reenen, 2006. "Measuring and Explaining Management Practices Across Firms and Countries," NBER Working Papers 12216, National Bureau of Economic Research, Inc.
- Brynjolfsson, Erik & Hitt, Lorin M., 2004.
"Computing Productivity: Firm-Level Evidence,"
4210-01, Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Timothy F. Bresnahan & Erik Brynjolfsson & Lorin M. Hitt, 1999.
"Information Technology, Workplace Organization and the Demand for Skilled Labor: Firm-Level Evidence,"
NBER Working Papers
7136, National Bureau of Economic Research, Inc.
- Diego A. Comin & Thomas Philippon, 2006.
"The Rise in Firm-Level Volatility: Causes and Consequences,"
in: NBER Macroeconomics Annual 2005, Volume 20, pages 167-228
National Bureau of Economic Research, Inc.
- Diego Comin & Thomas Philippon, 2005. "The Rise in Firm-Level Volatility: Causes and Consequences," NBER Working Papers 11388, National Bureau of Economic Research, Inc.
- Erik Brynjolfsson & Lorin M. Hitt, 2000. "Beyond Computation: Information Technology, Organizational Transformation and Business Performance," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 23-48, Fall.
- Romer, Paul, 1994.
"New goods, old theory, and the welfare costs of trade restrictions,"
Journal of Development Economics,
Elsevier, vol. 43(1), pages 5-38, February.
- Paul M. Romer, 1993. "New Goods, Old Theory, and the Welfare Costs of Trade Restrictions," NBER Working Papers 4452, National Bureau of Economic Research, Inc.
- Timothy F. Bresnahan & Erik Brynjolfsson & Lorin M. Hitt, 2002. "Information Technology, Workplace Organization, and the Demand for Skilled Labor: Firm-Level Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 117(1), pages 339-376.
- Erik Brynjolfsson & Haim Mendelson, 1997. "Information Systems and the Organization of Modern Enterprise," Working Paper Series 200, MIT Center for Coordination Science.
When requesting a correction, please mention this item's handle: RePEc:fip:fedfpr:y:2007:i:nov:x:13. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Noah Pollaczek)
If references are entirely missing, you can add them using this form.