Declining Industrial Disruption

54 Pages Posted: 9 Sep 2020

See all articles by James E. Bessen

James E. Bessen

Technology & Policy Research Initiative, BU School of Law

Erich Denk

Boston University - Technology & Policy Research Initiative

Joowon Kim

Duke University - Fuqua School of Business

Cesare Righi

Universitat Pompeu Fabra; Barcelona Graduate School of Economics

Date Written: February 2020

Abstract

Recent research finds that markups are rising, suggesting declining competition. But does less price competition mean less Schumpeterian “creative destruction”/industry dynamism? This paper reports the first recent estimates of trends in the displacement of industry-leading firms. Displacement hazards rose for several decades since 1970 but have declined sharply since 2000. Using a production function-based model to explore the role of investments, acquisitions, and lobbying, we find that investments by dominant firms in intangibles, especially software, are distinctly associated with greater persistence and reduced leapfrogging. Software investments by top firms soared around 2000, contributing substantially to the decline. Also, higher markups are associated with greater displacement hazards, linking rents positively with industry dynamism. While technology is often seen as disrupting industry leaders, it now appears to help suppress disruption.

Keywords: innovation, Schumpeter, competition, information technology, disruption

JEL Classification: D4, O33, L10, L4

Suggested Citation

Bessen, James E. and Denk, Erich and Kim, Joowon and Righi, Cesare, Declining Industrial Disruption (February 2020). Boston Univ. School of Law, Law and Economics Research Paper Forthcoming, Available at SSRN: https://ssrn.com/abstract=3682745 or http://dx.doi.org/10.2139/ssrn.3682745

James E. Bessen (Contact Author)

Technology & Policy Research Initiative, BU School of Law ( email )

765 Commonwealth Avenue
Boston, MA 02215
United States

Erich Denk

Boston University - Technology & Policy Research Initiative ( email )

Boston, MA 02215
United States

Joowon Kim

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States

Cesare Righi

Universitat Pompeu Fabra ( email )

Carrer de Ramon Trias Fargas 25-27
Jaume I building, room 20.1E34
Barcelona, 08005
Spain

HOME PAGE: http://www.crighi.com

Barcelona Graduate School of Economics ( email )

HOME PAGE: http://www.crighi.com

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