We are living in the age of the superstar firm. Companies like Samsung, Google, or BMW—the top players in their respective industries—are prospering. Yet economic growth remains sluggish in many parts of the world. The reason for that paradox, as the OECD has warned, is that the productivity gap between firms at the global frontier and those lagging behind has widened. Frontier firms are able to employ the most advanced technologies, which in turn allow them to win market share at the expense of their less productive competitors. And the globalized markets that frontier firms operate in disproportionately reward their knowledge advantage, setting them even further apart from the rest.
Do Most Companies Even Try to Innovate Anymore?
R&D is becoming more and more concentrated in a handful of superstar firms.
April 14, 2017
Summary.
We are living in the age of the superstar firm. Several explanations have been proposed for the emergence of this “winner takes most” competition: a drop in search and transaction costs because of the Internet; network effects; the ability to scale up quickly due to IT and automation. My analysis suggests another driver: R&D investment is increasingly concentrated in a few top firms. Some firms are investing heavily in R&D to expand their technological capabilities, while others don’t make that investment and fall further behind.