Big Business Stability and Economic Growth: Is What's Good for General Motors Good for America?

Posted: 26 May 2013 Last revised: 12 Feb 2014

See all articles by Kathy Fogel

Kathy Fogel

Suffolk University - Department of Finance

Randall Morck

University of Alberta - Department of Finance and Statistical Analysis; National Bureau of Economic Research (NBER); European Corporate Governence Institute; Asian Bureau of Finance and Economic Research

Bernard Yin Yeung

National University of Singapore - Business School

Multiple version iconThere are 3 versions of this paper

Date Written: July 13, 2007

Abstract

What is good for a country may not be good for its big businesses, at least recently. More turnover in top businesses correlates with faster per capita gross domestic product, productivity, and capital growth; supporting Schumpeter's [1942. Capitalism, Socialism and Democracy, third ed., Harper & Bros., New York, NY] theory of “creative destruction” — innovative firms blooming as stagnant ones wither. These correlations are greater in more developed economies, supporting Aghion and Howitt's [1992. A model of growth through creative destruction. Econometrica 60, 323-351] thesis that creative destruction matters more to economies nearer the technological frontier. More big business turnover also correlates with smaller government, common law, less bank-dependence, stronger shareholder rights, and greater openness.

Keywords: Business stability, Creative destruction, Economic growth

JEL Classification: O16, F30, G38

Suggested Citation

Fogel, Kathy and Morck, Randall K. and Yeung, Bernard Yin, Big Business Stability and Economic Growth: Is What's Good for General Motors Good for America? (July 13, 2007). Journal of Financial Economics (JFE), Vol. 89, No. 1, 2008; University of Alberta School of Business Research Paper No. 2013-241. Available at SSRN: https://ssrn.com/abstract=2269934

Kathy Fogel

Suffolk University - Department of Finance ( email )

8 Ashburton Place-Beacon Hill
Boston, MA 02108-2770
United States

Randall K. Morck (Contact Author)

University of Alberta - Department of Finance and Statistical Analysis ( email )

2-32C Business Building
Edmonton, Alberta T6G 2R6
Canada
780-492-5683 (Phone)
780-492-3325 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

European Corporate Governence Institute ( email )

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Belgium

Asian Bureau of Finance and Economic Research ( email )

BIZ 2 Storey 4, 04-05
1 Business Link
Singapore, 117592
Singapore

Bernard Yin Yeung

National University of Singapore - Business School ( email )

15 Kent Ridge Drive
BIZ 1 Level 6
Singapore, 119245
Singapore
65 6516 3075 (Phone)
65 6779 1365 (Fax)

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