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Entrepreneurship, Firm Dynamics and Growth

Paper Session

Sunday, Jan. 8, 2017 1:00 PM – 3:00 PM

Hyatt Regency Chicago, Regency A
Hosted By: American Economic Association
  • Chair: Tom Nicholas, Harvard University

Changing Business Dynamism: Volatility of Shocks versus Responsiveness to Shocks?

Ryan A. Decker
,
Federal Reserve Board
John C. Haltiwanger
,
University of Maryland
Ron S. Jarmin
,
U.S. Census Bureau
Javier Miranda
,
U.S. Census Bureau

Abstract

The pace of business dynamism as measured by indicators such as job reallocation has declined in the U.S. in recent decades, but this decline has not been monotonic for all sectors. For the High Tech sector, business dynamism as measured by the pace of job reallocation rose through the 1990s but then declined sharply in the post-2000 period. This is in contrast with the Retail Trade sector, which exhibited a sharp decline in dynamism in the 1990s. In this paper we ask whether the observed patterns in the High Tech sector reflect changes in the volatility of idiosyncratic TFP shocks or rather the response of businesses to those shocks. We focus on the High Tech sector since it is an important sector for innovation and productivity growth. Using plant-level data from the High Tech U.S. manufacturing sector, we document rising dispersion in idiosyncratic TFP shocks across plants and little change in the persistence of such shocks. This suggests the patterns of rising and then declining reallocation are not being driven by changes in the volatility of shocks. Instead, we find changes in the marginal effects of idiosyncratic plant-level productivity shocks on growth and survival that mimic the patterns of reallocation in the High Tech sector. During the 1990s, the responsiveness of growth and survival increased in the High Tech sector for young businesses. In contrast, during the 2000s responsiveness declined because of accelerating decline in the responsiveness of both young and mature businesses. These changes in the responsiveness yield substantial changes in the contribution of reallocation to aggregate (industry-level) productivity growth.

The Birth of American Ingenuity: Innovation and Inventors of the Golden Age

Ufuk Akcigit
,
University of Chicago
John Grigsby
,
University of Chicago
Tom Nicholas
,
Harvard University

Abstract

We examine the golden age of American technological development during the late
nineteenth and early twentieth centuries using new data on millions of inventions and
their creators. We undertake a major data matching exercise linking information from
US patent records with complete-count data from Federal Censuses between 1880 and
1940. We present a series of interrelated macro and micro-level facts, which help us to
address important questions related to innovation and long-run growth dynamics. In
particular we analyze key drivers of regional performance, openness to disruption, the
returns to innovation and the relationship between social mobility and invention.

Are Ideas Getting Harder to Find?

Nicholas Bloom
,
Stanford University
Charles I. Jones
,
Stanford University
John Van Reenen
,
Massachusetts Institute of Technology
Michael Webb
,
Stanford University

Abstract

In many growth models, economic growth arises from people creating ideas, and the long-run growth rate is the product of two terms: the effective number of researchers and the research productivity of these people. We present a wide range of evidence from various industries, products, and firms showing that research effort is rising substantially while research productivity is declining sharply. A good example is Moore’s Law. The number of researchers required today to achieve the famous doubling every two years of the density of computer chips is more than 75 times larger than the number required in the early 1970s. Across a broad range of industry specific case studies and all levels of aggregation from macro-level or firm-level, we find that ideas --- and in particular the exponential growth they imply --- are getting harder and harder to find. Exponential growth results from the large increases in research effort that offset its declining productivity.

A Global View of Creative Destruction

Chang-Tai Hsieh
,
University of Chicago
Pete Klenow
,
Stanford University

Abstract

We present a model of innovation driven by creative destruction where innovation is undertaken by domestic and by foreign firms. We show how trade frictions affect the aggregate innovation rate, job flows (job creation and destruction), and entry and exit rates from exporting. We then illustrate how to infer the underlying innovation rates and trade frictions from observed data on job flows and the firm life cycle in U.S. manufacturing.
JEL Classifications
  • O3 - Innovation; Research and Development; Technological Change; Intellectual Property Rights
  • O4 - Economic Growth and Aggregate Productivity