Creative Destruction and Firm-Specific Performance Heterogeneity

64 Pages Posted: 6 Apr 2007 Last revised: 30 Jan 2013

See all articles by Randall Morck

Randall Morck

University of Alberta - Department of Finance and Statistical Analysis; National Bureau of Economic Research (NBER); European Corporate Governence Institute; Asian Bureau of Finance and Economic Research

Hyunbae Chun

Sogang University - Department of Economics

Bernard Yin Yeung

National University of Singapore - Business School

Jung-Wook Kim

Seoul National University - Graduate School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: April 2007

Abstract

Traditional U.S. industries with higher firm-specific stock return and fundamentals performance heterogeneity use information technology (IT) more intensively and post faster productivity growth in the late 20th century. We argue that elevated firm performance heterogeneity mechanically reflects a wave of Schumpeter's (1912) creative destruction disrupting a wide swath of U.S. industries, with newly successful IT adopters unpredictably undermining established firms. This evidence validates endogenous growth theory models of creative destruction, such as Aghion and Howitt (1992); and suggests that recent findings of more elevated firm-specific performance variation in richer, faster growing countries with more transparent accounting, better financial systems, and more secure property rights might partly reflect more intensive creative destruction in those economies.

Suggested Citation

Morck, Randall K. and Chun, Hyunbae and Yeung, Bernard Yin and Kim, Jung-Wook, Creative Destruction and Firm-Specific Performance Heterogeneity (April 2007). NBER Working Paper No. w13011. Available at SSRN: https://ssrn.com/abstract=978402

Randall K. Morck (Contact Author)

University of Alberta - Department of Finance and Statistical Analysis ( email )

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Hyunbae Chun

Sogang University - Department of Economics ( email )

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Bernard Yin Yeung

National University of Singapore - Business School ( email )

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Jung-Wook Kim

Seoul National University - Graduate School of Business ( email )

Seoul, 151-742
Korea, Republic of (South Korea)

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