Arbeitspapier

What Happened to U.S. Business Dynamism?

In the past several decades, the U.S. economy has witnessed a number of striking trends that indicate a rising market concentration and a slowdown in business dynamism. In this paper, we make an attempt to understand potential common forces behind these empirical regularities through the lens of a micro-founded general equilibrium model of endogenous firm dynamics. Importantly, the theoretical model captures the strategic behavior between competing firms, its effect on their innovation decisions, and the resulting “best versus the rest” dynamics. We focus on multiple potential mechanisms that can potentially drive the observed changes and use the calibrated model to assess the relative importance of these channels with particular attention to the implied transitional dynamics. Our results highlight the dominant role of a decline in the intensity of knowledge diffusion from the frontier firms to the laggard ones in explaining the observed shifts. We conclude by presenting new evidence that corroborates a declining knowledge diffusion in the economy. We document a higher concentration of patenting in the hands of firms with the largest stock and a changing nature of patents, especially in the post-2000 period, which suggests a heavy use of intellectual property protection by market leaders to limit the diffusion of knowledge. These findings present a potential avenue for future research on the drivers of declining knowledge diffusion.

Language
Englisch

Bibliographic citation
Series: CESifo Working Paper ; No. 7854

Classification
Wirtschaft
Investment; Capital; Intangible Capital; Capacity
Aggregate Factor Income Distribution
Monopoly; Monopolization Strategies
Innovation and Invention: Processes and Incentives
Technological Change: Choices and Consequences; Diffusion Processes
Intellectual Property and Intellectual Capital
Subject
business dynamism
market concentration
competition
knowledge diffusion
step-by-step innovations
transitional dynamics

Event
Geistige Schöpfung
(who)
Akcigit, Ufuk
Ates, Sina T.
Event
Veröffentlichung
(who)
Center for Economic Studies and ifo Institute (CESifo)
(where)
Munich
(when)
2019

Handle
Last update
10.03.2025, 11:46 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Akcigit, Ufuk
  • Ates, Sina T.
  • Center for Economic Studies and ifo Institute (CESifo)

Time of origin

  • 2019

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