Microeconomic Evidence of Creative Destruction in Industrial and Developing Countries

By Eric Bartelsman, John C. Haltiwanger, S. Scarpetta. Social Science Research Network, 2004

637 citations recorded by the source corpus.

In this paper the authors provide an analysis of the process of creative destruction across 24 countries and 2-digit industries over the past decade. They rely on a newly assembled dataset that draws from different micro data sources (business registers, census, or representative enterprise surveys). The novelty of their approach is in the harmonization of firm-level data across countries, which enables international comparisons and the identification of country-specific factors as opposed to sector and time effects. All countries display a massive reallocation of resources, with the entry and exit of many firms in all markets, the failure of many newcomers and the expansion of successful ones. This process of creative destruction affects productivity directly by reallocating resources toward more productive uses, but also indirectly through the effects of increased market contestability. There are also large differences across groups of countries. While entry and exit rates are fairly similar across industrial countries, post-entry performance differs markedly between Europe and the United States, a potential indication of the importance of barriers to firm growth as opposed to barriers to entry. Transition economies show an even more impressive process of creative destruction and, those that have progressed the most toward a market economy show better outcomes from this process. Finally, Mexico shows large firm dynamics with many new firms entering the battle but also many failing rapidly, while Argentina resembles Continental Europe with smaller flows and less impressive post-entry growth of successful firms.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/48ee1782221213824ee7fb7a33678d1224d2f19c

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

Citations in the corpus

Toward understanding the impact of artificial intelligence on labor (2019, background): “Even if technology depresses employment for some types of labor, it can create new needs and new opportunities through “ creative destruction ” (36 – 38).”
Invariances and Diversities in the Patterns of Industrial Evolution: Some Evidence from Italian Manufacturing Industries (2007, background): “only to the manufacturing industry (with ISIC code between 151 and 366) for which, according to Bartelsman et al. (2004), firms with at least 20 employees represent, in Italy, more than 68% of the total employment.”
Entrepreneurship, job creation and wage growth (2011, positive): “(2001) and used by Bartelsman et al. (2004). This method decomposes the average wage increase into parts that can be ascribed to continuing, exiting and entering establishments, respectively.”
Cross Country Differences in Productivity: The Role of Allocative Efficiency (2007, background): “…numerical explorations, we select: • γ = 0.9, • α =0.1, • λ = .10, this is consistent with evidence f exit rates in the United States and other OECD countries (Bartelsman et al. 2004) • R=.03, and δ =.12, consistent with long run real interest rates in OECD countries and typical depreciation…”
Jobs for Shared Prosperity: Time for Action in the Middle East and North Africa (2013, background): “6.1 Signals important for hiring Source: Phone interview with recruiters, February 2012.”
Cross Country Differences in Job Reallocation: The Role of Industry, Firm Size and Regulations (2014, positive): “A growing body of evidence has accumulated suggesting that the reallocation of factors of production – including labor – plays a major role in driving productivity growth (see for example Olley and Pakes, 1996; Griliches and Regev, 1995; Foster et al., 2001, 2002; Bartelsman et al., 2004).”
High Growth Entrepreneurs, Public Policies and Economic Growth (2007, background): “Bartelsman et al. (2005a) have shown that the magnitude of firm creation and destruction is larger in transition countries than in industrial countries: many new smaller firms have been replacing obsolete larger units inherited from the central-planning period.”
Drivers of Entrepreneurship and Post-Entry Performance of Newborn Firms in Developing Countries (2014, background): “*Corresponding Author: Prof. Marco Vivarelli Facoltà di Economia Università Cattolica Via Emilia Parmense 84 29122 Piacenza marco.vivarelli@unicatt.it”
The Firm Size Distribution Across Countries and Skill-Biased Change in Entrepreneurial Technology (2018, result): “The only previous mention of such a relationship I found is Bartelsman et al. (2004), who show that firm size dispersion is substantially higher in industrialized countries compared to emerging markets, using OECD and World Bank data for a much smaller set of countries.”
Competencies and Institutions Fostering High-growth Firms (2008, positive): “Empirical evidence suggests that a high turnover (entry plus exit) of firms in itself boosts the number of HGFs (cf., Bartelsman et al. 2004, 2005, Brown et al. 2006, Birch 2006, Fogel et al. 2006, and Caballero 2007).”