Innovation, Productivity Dispersion, and Productivity Growth
February 2018
Working Paper Number:
CES-18-08
Abstract
We examine whether underlying industry innovation dynamics are an important driver of the large dispersion in productivity across firms within narrowly defined sectors. Our hypothesis is that periods of rapid innovation are accompanied by high rates of entry, significant experimentation and, in turn, a high degree of productivity dispersion. Following this experimentation phase, successful innovators and adopters grow while unsuccessful innovators contract and exit yielding productivity growth. We examine the dynamic relationship between entry, productivity dispersion, and productivity growth using a new comprehensive firm-level dataset for the U.S. We find a surge of entry within an industry yields an immediate increase in productivity dispersion and a lagged increase in productivity growth. These patterns are more pronounced for the High Tech sector where we expect there to be more innovative activities. These patterns change over time suggesting other forces are at work during the post-2000 slowdown in aggregate productivity.
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:
investment,
production,
econometric,
manufacturing,
industrial,
quarterly,
productivity growth,
growth,
technological,
acquisition,
entrepreneurial,
entrepreneur,
entrepreneurship,
productivity increases,
industry productivity,
growth productivity,
recession,
innovation,
innovator,
productivity size,
patent,
innovate,
dispersion productivity,
productivity dispersion,
innovative,
innovation productivity
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Bureau of Labor Statistics,
National Science Foundation,
Center for Economic Studies,
Total Factor Productivity,
National Bureau of Economic Research,
Bureau of Economic Analysis,
Longitudinal Business Database,
IQR,
Survey of Industrial Research and Development,
Employer Identification Numbers,
Generalized Method of Moments,
Unemployment Insurance,
VAR,
North American Industry Classification System,
Longitudinal Employer Household Dynamics,
Information and Communication Technology Survey,
Census Bureau Business Register,
TFPR,
TFPQ,
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Ewing Marion Kauffman Foundation,
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Business Dynamics Statistics,
Business R&D and Innovation Survey,
Business Research and Development and Innovation Survey,
Federal Statistical Research Data Center,
Annual Survey of Entrepreneurs,
Annual Business Survey
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