Declining business dynamism: Structural and policy determinants

Flavio Calvino, Chiara Criscuolo and Rudy Verlhac
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Flavio Calvino: OECD
Rudy Verlhac: OECD

No 94, OECD Science, Technology and Industry Policy Papers from OECD Publishing

Abstract: This paper analyses trends in business dynamism across 18 countries and 22 industries over the last two decades, using highly representative comparable data. It finds that declines in business dynamism, pervasive in many countries, are driven by dynamics occurring at a disaggregated sectoral level, rather than reallocation across sectors. Average trends within sectors point to steady declines in each country over the last two decades, even after accounting for the role of the business cycle, with market structure and firm heterogeneity emerging as prominent determinants. Investments in intangibles and digital technologies, globalisation, and changes in demographics also contribute to these trends. Policy can, however, help boost business dynamism by reducing barriers to entry and to knowledge diffusion, favouring experimentation and creative destruction, and increasing absorptive capacity and firms’ potential to benefit from technological change.

Keywords: Business dynamism; Employment dynamics; Firm demography; Job reallocation (search for similar items in EconPapers)
Date: 2020-11-10
New Economics Papers: this item is included in nep-bec, nep-ent, nep-ino, nep-sbm and nep-tid
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Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:oec:stiaac:94-en

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