The Rise of Star Firms: Intangible Capital and Competition

Forthcoming Review of Financial Studies

108 Pages Posted: 21 Aug 2018 Last revised: 11 Apr 2023

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

The large divergence in the returns of top-performing (star) firms and the rest of the economy is substantially reduced when we account for mismeasurement of intangible capital. Star firms produce and invest more per dollar of invested capital, are not protected from trade shocks, and have more valuable innovations as measured by the market value of patents compared to non-stars. While star firms have higher markups, these are predicted early in their life-cycle at a time when they are small. Overall, correcting for the mismeasurement, the evidence supports the role of efficiency in determining the rise of star firms

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). Forthcoming Review of Financial Studies, 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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