The Rise of Star Firms: Intangible Capital and Competition

87 Pages Posted: 21 Aug 2018 Last revised: 8 Jun 2020

See all articles by Meghana Ayyagari

Meghana Ayyagari

George Washington University - School of Business

Asli Demirgüç-Kunt

World Bank

Vojislav Maksimovic

University of Maryland - Robert H. Smith School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: April 20, 2020

Abstract

There is a divergence in the returns of top-performing (star) firms and the rest of the economy, especially in industries that rely on a skilled labor force, raising concerns of their market power. We show that the divergence is largely explained by the mismeasurement of intangible capital. While star status is associated with greater market power, star firms produce and invest more per dollar of invested capital, and are not differentially affected by exogenous competitive shocks than other firms. Concerns that star firms are welfare reducing welfare are not supported by our data.

Keywords: star firms, intangible capital, organizational capital, industry concentration, ROIC, capital expenditure

JEL Classification: G30, G31, G32, L22, L23, L25

Suggested Citation

Ayyagari, Meghana and Demirgüç-Kunt, Asli and Maksimovic, Vojislav, The Rise of Star Firms: Intangible Capital and Competition (April 20, 2020). Available at SSRN: https://ssrn.com/abstract=3230154

Meghana Ayyagari

George Washington University - School of Business ( email )

Washington, DC 20052
United States

Asli Demirgüç-Kunt

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Vojislav Maksimovic (Contact Author)

University of Maryland - Robert H. Smith School of Business ( email )

Van Munching Hall
College Park, MD 20742-1815
United States
301-405-2125 (Phone)
301-314-9157 (Fax)

HOME PAGE: http://scholar.rhsmith.umd.edu/vmax/home

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