The Rise of Star Firms: Intangible Capital and Competition

75 Pages Posted: 21 Aug 2018 Last revised: 29 Apr 2019

See all articles by Meghana Ayyagari

Meghana Ayyagari

George Washington University - School of Business

Asli Demirgüç-Kunt

World Bank - Development Research Group; 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 2019

Abstract

There is a divergence in the returns of top-performing 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 explained by the mismeasurement of intangible capital. In fact, star firms produce more per dollar of invested capital, have higher growth, innovation, and productivity and are not differentially affected by exogenous competitive shocks than other firms. Their pricing power supports their high intangible capital investment. Some exceptional firms may pose concerns due to their potential to foreclose competition in the future.

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 2019). Available at SSRN: https://ssrn.com/abstract=3230154 or http://dx.doi.org/10.2139/ssrn.3230154

Meghana Ayyagari

George Washington University - School of Business ( email )

Washington, DC 20052
United States

Asli Demirgüç-Kunt

World Bank - Development Research Group ( email )

United States
202-473-7479 (Phone)
202-522-1155 (Fax)

HOME PAGE: http://econ.worldbank.org/staff/ademirguckunt/

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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