Strategy When Creative Destruction Accelerates

Abstract

Life is short. That’s never been more true for corporations today. An analysis of all 29,688 firms that listed from 1960 through 2009, divided into 10-year cohorts, reveals that newly listed firms in recent cohorts fail more frequently than did those in older ones. Creative destruction is accelerating because there is a fundamental shift in the American economy. The pre-1970 firms tended to be heavily invested in physical infrastructure, such as factories and inventories. Later cohorts have relied increasingly on intangible assets, such as databases, proprietary algorithms, and expert workers. This transformation is a double-edged sword. The good news is that newer firms are more nimble. The bad news for these firms is that their days are numbered. That is, unless they continuously innovate.

Keywords: Creative Destruction, American Economy, Intangibles, Business Models

JEL Classification: B26, O1, O3, O4