Download This PaperThe Rise of Star Firms: Intangible Capital and Competition
Forthcoming Review of Financial Studies
108 Pages Posted: 21 Aug 2018 Last revised: 11 Apr 2023
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The Rise of Star Firms: Intangible Capital and Competition
Who are America's Star Firms?
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
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