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Technology Locks, Creative Destruction, and Non-Convergence in Productivity Levels

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  • Douglas Dwyer

    (William M. Mercer, Inc.)

Abstract

Plant-level data from U.S. textile industries indicate (1) significant cross-sectional dispersion in plant-level productivity within narrowly defined industries, (2) that highly productive plants grow faster and are less likely to exit, (3) dispersion in productivity is larger in industries with more rapid productivity growth, (4) older plants are bigger, and (5) plant births and closures are common to all four-digit textile industries. This paper presents an extended vintage model to explain these facts. The model assumes that a plant incurs a fixed cost of adopting the current best practice and convex costs of adjusting its capital stock. The model provides alternative explanations for the phenomena of investment spikes and S-shaped diffusion. Finally, the model interprets the fact that entry and exit are positively correlated across industries as evidence that variation in plant turnover across industries is driven by variation in technology rather than variation in demand growth. (Copyright: Elsevier)

Suggested Citation

  • Douglas Dwyer, 1998. "Technology Locks, Creative Destruction, and Non-Convergence in Productivity Levels," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(2), pages 430-473, April.
    • Handle: RePEc:red:issued:v:1:y:1998:i:2:p:430-473
    DOI: 10.1006/redy.1998.0010
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    Cited by:

    1. Douglas W Dwyer, 2001. "Plant-Level Productivity and the Market Value of a Firm," Working Papers 01-03, Center for Economic Studies, U.S. Census Bureau.
    2. Lilia Aleksanyan & Jean-Pierre Huiban, 2016. "Economic and financial determinants of firm bankruptcy: evidence from the French food industry," Review of Agricultural, Food and Environmental Studies, Springer, vol. 97(2), pages 89-108, September.
    3. C.J. Krizan & John Haltiwanger & Lucia Foster, 2002. "The Link Between Aggregate and Micro Productivity Growth: Evidence from Retail Trade," Working Papers 02-18, Center for Economic Studies, U.S. Census Bureau.
    4. Jeremy Greenwood & Boyan Jovanovic, 2001. "Accounting for Growth," NBER Chapters, in: New Developments in Productivity Analysis, pages 179-224, National Bureau of Economic Research, Inc.
    5. Aloysius Gunadi Brata & Henri L. F. De Groot & Wouter Zant, 2018. "Shaking up the Firm Survival: Evidence from Yogyakarta (Indonesia)," Economies, MDPI, vol. 6(2), pages 1-14, April.
    6. Maliranta, Mika, 2005. "Foreign-owned Firms and Productivity-enhancing Restructuring in Finnish Manufacturing Industries," Discussion Papers 965, The Research Institute of the Finnish Economy.
    7. repec:hal:wpspec:info:hdl:2441/7185 is not listed on IDEAS
    8. Ayşe İmrohoroğlu & Şelale Tüzel, 2014. "Firm-Level Productivity, Risk, and Return," Management Science, INFORMS, vol. 60(8), pages 2073-2090, August.
    9. repec:spo:wpmain:info:hdl:2441/7185 is not listed on IDEAS
    10. Flora Bellone & Patrick Musso & Michel Quéré & Lionel Nesta, 2006. "Productivity and Market Selection of French Manufacturing Firms in the Nineties," Revue de l'OFCE, Presses de Sciences-Po, vol. 97(5), pages 319-349.
    11. Rebecca Henderson, 2021. "Innovation in the 21st Century: Architectural Change, Purpose, and the Challenges of Our Time," Management Science, INFORMS, vol. 67(9), pages 5479-5488, September.
    12. repec:hal:spmain:info:hdl:2441/7185 is not listed on IDEAS
    13. Boyan Jovanovic & Chung-Yi Tse, 2006. "Creative Destruction in Industries," NBER Working Papers 12520, National Bureau of Economic Research, Inc.
    14. Elliott Parker & Mark Pingle, 2006. "The distributional effects of selection and capital accumulation on firm productivity under imperfect capital markets," Empirical Economics, Springer, vol. 31(3), pages 677-697, September.
    15. Uchida, Hirofumi, 2020. "Natural selection: A review of studies on firms’ exit and efficiency," MPRA Paper 103938, University Library of Munich, Germany.
    16. repec:spo:wpecon:info:hdl:2441/7185 is not listed on IDEAS

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    More about this item

    JEL classification:

    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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