Organizations and Markets

IT and Creative Destruction

17 September 2007 at 3:00 pm Peter G. Klein Leave a comment

| Peter Klein |

Information technology (IT) intensity is correlated with firm-specific performance heterogeneity, controlling for industry- and time-fixed effects and a host of strategic and financial control variables. Moreover, high rates of firm-specific performance heterogeneity are associated with subsequent increases in industry total factor productivity (TFP). In other words, IT can be interpreted as a general-purpose technology that unleashes a wave of innovation, leading to a shakeout followed by performance improvements — Shumpeter’s “gale of creative destruction.”

So say Hyunbae Chun, Jung-Wook Kim, Randall Morck, and Bernard Yeung in “Creative Destruction and Firm-Specific Performance Heterogeneity” (NBER Working Paper No. 13011, April 2007). (Non-gated version here.) There’s not much theory but the empirical exercise is interesting and worth a look.

Entry filed under: - Klein -, Business/Economic History, Management Theory, Strategic Management.