Big Data and Firm Dynamics

Abstract

We study a model where firms accumulate data as a valuable intangible asset. Data accumulation affects firms’ dynamics. It increases the skewness of the firm size distribution as large firms generate more data and invest more in active experimentation. On the other hand, small data-savvy firms can overtake more traditional incumbents, provided they can finance their initial money-losing growth. Our model can be used to estimate the market and social value of data.

Keywords: Big Data, Data Feedback Loop, Active Experimentation, Industry Competition

JEL Classification: E21, G11, G14, L1, L15