Creative Destruction and Firm-Specific Performance Heterogeneity

Hyunbae Chun, Jung-Wook Kim, Randall Morck and Bernard Yeung

No 13011, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Traditional U.S. industries with higher firm-specific stock return and fundamentals performance heterogeneity use information technology (IT) more intensively and post faster productivity growth in the late 20th century. We argue that elevated firm performance heterogeneity mechanically reflects a wave of Schumpeter's (1912) creative destruction disrupting a wide swath of U.S. industries, with newly successful IT adopters unpredictably undermining established firms. This evidence validates endogenous growth theory models of creative destruction, such as Aghion and Howitt (1992); and suggests that recent findings of more elevated firm-specific performance variation in richer, faster growing countries with more transparent accounting, better financial systems, and more secure property rights might partly reflect more intensive creative destruction in those economies.

JEL-codes: E32 G3 O3 O4 O51 (search for similar items in EconPapers)
Date: 2007-04
New Economics Papers: this item is included in nep-bec, nep-ent, nep-his, nep-ino and nep-mac
Note: CF
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Citations: View citations in EconPapers (8)

Published as Chun, Hyunbae & Kim, Jung-Wook & Morck, Randall & Yeung, Bernard, 2008. "Creative destruction and firm-specific performance heterogeneity," Journal of Financial Economics, Elsevier, vol. 89(1), pages 109-135, July.

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