Technological Obsolescence

Song Ma

No 29504, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper proposes a new measure of technological obsolescence using detailed patent data. Using this measure, we present two sets of results. First, firms' technological obsolescence foreshadows substantially lower growth, productivity, and reallocation of capital. This finding applies mainly for obsolescence of core innovation and embodied innovation, and it is stronger in competitive product markets. Second, in stock markets, high-obsolescence firms under-perform low-obsolescence firms by 7 percent annually. Using analyst forecast data, we show this is due to a systematic overestimation of future profits of obsolescent firms. The measure contains incremental information about firm innovation relative to measures focusing on new innovation.

JEL-codes: G1 G3 G4 O3 O4 (search for similar items in EconPapers)
Date: 2021-11
New Economics Papers: this item is included in nep-com, nep-sbm and nep-tid
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