The dark side of creative destruction: innovation and retirement of capital

Abdul Azeez Erumban and Marcel Timmer

Industrial and Corporate Change, 2012, vol. 21, issue 5, 1149-1174

Abstract: The process of creative destruction, while propelling the economy, also leads to obsolescence and discarding of capital. To date, there is limited empirical evidence on actual discard behavior by firms and its determinants. Building on insights from the theoretical literature on economic growth and obsolescence, this article makes an attempt to understand the determinants of scrapping, with a special focus on the role of innovation. The article uses a unique database on asset retirements by manufacturing firms in the Netherlands and relates it to a range of economic and innovation variables. We find that innovation plays a significant role in determining the discard of capital assets. Process innovation by a firm is important in the case of machinery scrapping, while the introduction of a new product in a firm increases discards of computers. We also find evidence for an obsolescence effect: the average age has a significant role in discarding, in particular, computers. We find no evidence for a significant role of output and wage rates in driving capital discard. Copyright 2012 The Author 2012. Published by Oxford University Press on behalf of Associazione ICC. All rights reserved., Oxford University Press.

Date: 2012
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://hdl.handle.net/10.1093/icc/dts005 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:indcch:v:21:y:2012:i:5:p:1149-1174

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

Industrial and Corporate Change is currently edited by Josef Chytry

More articles in Industrial and Corporate Change from Oxford University Press and the Associazione ICC Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK.
Bibliographic data for series maintained by Oxford University Press ().