Working Paper: NBER ID: w13011
Authors: Hyunbae Chun; Jungwook Kim; Randall Morck; Bernard Yeung
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.
Keywords: Creative Destruction; Performance Heterogeneity; Information Technology; Productivity Growth
JEL Codes: E32; G31; O30; O51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| firm performance heterogeneity (L25) | IT intensity (L86) |
| IT intensity (L86) | firm performance heterogeneity (L25) |
| IT intensity (L86) | innovation (O35) |
| innovation (O35) | firm performance heterogeneity (L25) |
| IT intensity (L86) | creative destruction process (O39) |
| creative destruction process (O39) | firm performance heterogeneity (L25) |