Business Dynamism and Innovation: Evidence from Novel 19th-Century Microdata

Antonin Bergeaud, Ruveyda Nur Gozen and Suleyman Gozen
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Antonin Bergeaud: HEC Paris - Economics & Decision Sciences
Ruveyda Nur Gozen: Cardiff University - Cardiff Business School
Suleyman Gozen: University of Bristol

No 1650, HEC Research Papers Series from HEC Paris

Abstract: We construct a novel establishment-level dataset combining the nineteenth-century U.S. Census of Manufactures (1850-1880) with patent records from CUSP to examine how innovation shaped firm performance in early industrial America. Patenting establishments were substantially larger than comparable non-patenters across all dimensions (employment, capital, output, and output per worker) with premia further amplified among firms that produced breakthrough inventions. Estimating establishment-level production functions using Levinsohn-Petrin approach, we find that patenting is associated with higher revenue total factor productivity (TFPR) while leaving markups unchanged on average. Breakthrough innovations, however, are associated with gains on both margins, with a size decomposition revealing the strongest amplification among the largest establishments, consistent with superstar dynamics, yet small breakthrough innovators also capture meaningful gains, suggesting the returns to invention were not exclusive to large firms.

Keywords: Innovation; Entrepreneurship; Establishment Performance; Production Function Estimation; Productivity; Economic Development; Industrial Revolution (search for similar items in EconPapers)
JEL-codes: D22 D24 J16 L26 N61 N71 O14 O31 O33 O34 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2026-08-01
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