Innovation-driven economic growth

Acknowledgements
Prof. Dr. Philippe Aghion for his remarks on the published version of this work.

Technological Change and Entrepreneurial Exit: a U-Shape Relationship (Link)

This article investigates the link between productivity growth and entrepreneurial exit when technological change occurs. For this purpose, the United States (US) private industrial sector in the decade from 1995 to 2005 is analyzed. By acquiring total factor productivity data from the US Bureau of Labor Statistics and the exit rate of economic establishments from the US Census Bureau, an econometric panel study is presented. The empirical results suggest a U-shaped relationship with a weaker significance at the lower bound, elucidating complexities in industrial turnover dynamics. In this regard, an extended comparative analysis is conducted for the 2009–2019 period of productivity growth slowdown, where the results suggest an inverted U-shaped relationship. By facilitating the theoretical exploration of the escape-competition and Schumpeterian effects, this analysis provides a conceptual framework that enables the identification of Creative Destruction in the 1995–2005 period under scrutiny. Furthermore, findings underscore a crucial role of public policy in managing knowledge diffusion to mitigate industrial fabric destruction. Although both periods are driven by the intensity of innovation, they are ultimately shaped by competition.

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