Working Paper: NBER ID: w12394
Authors: Kathy Fogel; Randall Morck; Bernard Yeung
Abstract: What is good for big business need not generally advance a country's overall economy. Big business turnover correlates with rising income, productivity, and (in high income countries) faster capital accumulation; consistent with Schumpeter's (1912) creative destruction and recent formalizations like Aghion and Howitt (1992). Turnover appears to "cause" growth; and disappearing behemoths, more than rising stars, drive our results. Stronger findings suggest more intense creative destruction in countries with higher incomes, as well as those with smaller governments, Common Law courts, smaller banking systems, stronger shareholder rights, and more open economies. Only the last matters more in lower income countries.
Keywords: Big Business; Economic Growth; Creative Destruction; Business Turnover
JEL Codes: O16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| big business turnover (M21) | economic growth (O49) |
| big business turnover (M21) | rising income productivity (O49) |
| big business turnover (M21) | faster capital accumulation (E22) |
| less persistent dominance of large businesses (L19) | economic growth (O49) |
| business stability (L25) | economic growth (O49) |
| economic dynamics (P42) | causal dynamics (C69) |