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The Rise of Star Firms: Intangible Capital and Competition

Author

Listed:
  • Meghana Ayyagari

    (School of Business, George Washington University)

  • Asli Demirguc-Kunt

    (Center for Global Development)

  • Vojislav Maksimovic

    (Robert H Smith School of Business at the University of Maryland)

Abstract

The large divergence in the returns of top-performing star firms and the rest of the economy is substantially reduced when we account for the mismeasurement of intangible capital. Star firms produce and invest more per dollar of invested capital, have more valuable innovations as measured by the market value of patents, and are as exposed to competitive shocks as non-stars. While star firms have higher markups, these are predicted early in their life-cycle at a time when they are small. Overall, correcting for mismeasurement, the evidence points to superior ability of star firms to use tangible and intangible capital.

Suggested Citation

  • Meghana Ayyagari & Asli Demirguc-Kunt & Vojislav Maksimovic, 2022. "The Rise of Star Firms: Intangible Capital and Competition," Working Papers 627, Center for Global Development.
    • Handle: RePEc:cgd:wpaper:627
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    Cited by:

    1. Jacques Bughin & Nicolas van Zeebroeck, 2024. "Strategic Renewal and Corporate Return of Digital Transformation," Working Papers TIMES² 2024-071, ULB -- Universite Libre de Bruxelles.
    2. Sandström, Maria, 2020. "Intangible Capital, Markups and Pro fits," Working Paper Series 2020:4, Uppsala University, Department of Economics.

    More about this item

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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