Impediments to the Schumpeterian Process in the Replacement of Large Firms

Mara Faccio () and John J. McConnell

No 27871, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Using newly-assembled data encompassing up to 75 countries and starting circa 1910, we find that the Schumpeterian process of creative destruction aptly describes the replacement of large firms by other firms, but exceptions to the norm of replacement are not rare and replacement is often not by new firms. Initial firm size and political connections represent the main obstacles to the Schumpeterian process while board interlocks and a corporate culture of innovation play modest roles. Consistent with a theory of political capture, when accompanied by regulations that restrict entry, political connections play a formidable role in abetting large firms remaining large.

JEL-codes: G3 G38 O16 P16 (search for similar items in EconPapers)
Date: 2020-09
New Economics Papers: this item is included in nep-bec, nep-ent, nep-his, nep-ino and nep-tid
Note: CF IFM POL
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