Essays on US Business Dynamics

Abstract

This dissertation investigates the life cycle dynamics of US firms. In Chapter 2, I summarize a set of recent trends which I refer to as the ``Decline in US Business Dynamism". I then build and calibrate a model of firm dynamics which includes each of these measures of business dynamism as endogenous outcomes. I use this model to examine several potential causes for the trends in question. In particular, I examine demographic changes, increases in firm market power and changes in fixed, entry and adjustment costs. I argue that none of the proposed explanations can account for the entire set of facts in on their own.

Chapter 3 of the dissertation introduces a dataset of publicly listed American firms. I use these data to explore relationships between firm age, firm growth, R&D spending and patenting. I find that, conditional on firm size, mature firms conduct less R&D and take out more patents. However, the patents that mature firms take out are less valuable where the value of a patent is measured both by citations and changes in the market value of the firm. I then introduce a simple model of firm dynamics and R&D spending to frame the results

Lastly, in Chapter 4 I use a production function estimation approach to analyze the relationship between productivity, firm age and \rd intensity. These estimates can be used in a wide variety of quantitative applications. This is because the empirical method that I develop relies on a minimal set of assumptions. I find that revenue productivity, is positively related to firm size and age. I also find evidence of a non-linear relationship between R&D intensity and productivity. The marginal effect of R&D intensity on productivity is higher for more productive firms. Another emphasis of this chapter is on the uncertainty of the R&D process. I find that realizations of the volatility of future productivity are positively related to \rd intensity and negatively related to firm age since listing.