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Analysis of transition dynamics caused by technological breakthroughs: Cause of productivity slowdown and drop in existing firms’ stock prices

Kazuyoshi Ohki

Structural Change and Economic Dynamics, 2015, vol. 35, issue C, 12-25

Abstract: This paper examines the transition dynamics caused by technological breakthroughs. Our results show that technological breakthroughs cause a productivity slowdown and a drop in the stock prices of existing firms; these findings are consistent with observations in the 1970s. We explain how technological breakthroughs cause these phenomena. The emergence of a new technology creates new business opportunities, which reduces existing firms’ profits, thus causing their stock prices to drop. This decline in existing firms’ profits discourages R&D-intensive firms from entering the sector; this decreases aggregate R&D activity, and thus the growth rate of productivity declines.

Keywords: R&D; Semi-endogenous growth; Technological breakthrough; Productivity slowdown; Stock price (search for similar items in EconPapers)
JEL-codes: O11 O31 O41 (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1016/j.strueco.2015.09.001

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