Creative Destruction and Firm-Specific Performance Heterogeneity
Posted: 26 May 2013 Last revised: 4 Jun 2013
Date Written: July 24, 2007
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 this mechanically reflects a wave of Schumpeter's creative destruction disrupting a wide swath of industries, with successful IT adopters unpredictably undermining established firms. This validates endogenous growth theory models of creative destruction and suggests intensified creative destruction as explaining findings associating greater firm-specific performance variation with higher per capita GDPs, economy growth rates, accounting standards, financial system development, and property right protection.
Keywords: Creative destruction, Firm-specific variation, Information technology
JEL Classification: G12, G14, N22, O33
Suggested Citation: Suggested Citation