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The Rise of Star Firms : Intangible Capital and Competition

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  • Ayyagari,Meghana
  • Demirguc-Kunt,Asli
  • Maksimovic,Vojislav

Abstract

There is a divergence in the returns of top-performing firms and the rest of the economy, especially in industries that rely on a skilled labor force, raising concerns about their market power. This paper shows that the divergence is explained by the mismeasurement of intangible capital. Compared with other firms, star firms produce more per dollar of invested capital, have higher growth, innovation, and productivity and are not differentially affected by exogenous competitive shocks. Their pricing power supports their high intangible capital investment. Some exceptional firms may pose concerns due to their potential to foreclose competition in the future.

Suggested Citation

  • Ayyagari,Meghana & Demirguc-Kunt,Asli & Maksimovic,Vojislav, 2019. "The Rise of Star Firms : Intangible Capital and Competition," Policy Research Working Paper Series 8832, The World Bank.
    • Handle: RePEc:wbk:wbrwps:8832
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    Cited by:

    1. Sandström, Maria, 2020. "Intangible Capital, Markups and Pro fits," Working Paper Series 2020:4, Uppsala University, Department of Economics.
    2. Jacques Bughin & Nicolas van Zeebroeck, 2024. "Strategic Renewal and Corporate Return of Digital Transformation," Working Papers TIMES² 2024-071, ULB -- Universite Libre de Bruxelles.

    More about this item

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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