From Productivity to Firm Growth

35 Pages Posted: 10 Jun 2021

See all articles by James E. Bessen

James E. Bessen

Technology & Policy Research Initiative, BU School of Law

Erich Denk

Technology & Policy Research Initiative, BU School of Law

Date Written: 2021

Abstract

It is widely held that more productive firms grow faster, thus reallocating resources and raising aggregate productivity. Yet little empirical research identifies the features of the mechanisms affecting this process. This paper develops and tests a general model encompassing several mechanisms used to overcome informational frictions to growth. We find that firm size, productivity dispersion, and large firm investments in intangibles are all significantly related to changes in firm growth in response to productivity. These factors can account for much of the decline in the response to productivity since 2000 (Decker et al. 2020). Also, industry concentration is directly related to aggregate productivity growth.

Keywords: L13, L15, D22, D24

JEL Classification: information technology, productivity growth, firm growth, industry concentration

Suggested Citation

Bessen, James E. and Denk, Erich, From Productivity to Firm Growth (2021). Available at SSRN: https://ssrn.com/abstract=3862796 or http://dx.doi.org/10.2139/ssrn.3862796

James E. Bessen (Contact Author)

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

765 Commonwealth Avenue
Boston, MA 02215
United States

Erich Denk

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

Boston, MA 02215
United States

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