New Technology Sectoral Disruptions

68 Pages Posted: 17 Jun 2024 Last revised: 11 Jan 2025

See all articles by Tolga Caskurlu

Tolga Caskurlu

University of Amsterdam Business School

Gerard Hoberg

University of Southern California - Marshall School of Business - Finance and Business Economics Department

Gordon M. Phillips

Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER)

Date Written: December 01, 2023

Abstract

We construct a novel measure of technology sectoral disruptions (TSDs) using a dynamic text-based spatial model of patents based on the extent to which innovation is suddenly highly correlated across multiple industries. We identify multiple TSDs occurring over a 70-year period of time. Abnormal stock returns and insider trading indicate that TSDs are largely unexpected and generate positive and long-lasting value gains. Impacted small firms initially increase equity issuance, reduce equity payouts, and increase both R&D and asset growth and experience increased valuations consistent with Schumpeter's 1912 theory of creative destruction and Arrow's 1962 theory of innovation by smaller firms. Large firms, in contrast, on average reduce R&D and capital expenditures and experience declining valuations and decreased sales growth.

Keywords: Patents, sectoral disruptions, innovation, R&D, insider trading, analyst forecasts, Schumpeter

JEL Classification: O31, O34, D43, F13

Suggested Citation

Caskurlu, Tolga and Hoberg, Gerard and Phillips, Gordon M., New Technology Sectoral Disruptions (December 01, 2023). FEB-RN Research Paper No. 36/2025, USC Marshall School of Business Research Paper Sponsored by iORB, Tuck School of Business Working Paper, Available at SSRN: https://ssrn.com/abstract=4866566 or http://dx.doi.org/10.2139/ssrn.4866566

Tolga Caskurlu

University of Amsterdam Business School ( email )

Roetersstraat 18
Amsterdam, 1018WB
Netherlands

Gerard Hoberg (Contact Author)

University of Southern California - Marshall School of Business - Finance and Business Economics Department ( email )

Marshall School of Business
Los Angeles, CA 90089
United States

HOME PAGE: http://faculty.marshall.usc.edu/Gerard-Hoberg/

Gordon M. Phillips

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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