Supersize Me Intangibles and Industry Concentration Matej Bajgar
Supersize Me: Intangibles and Industry Concentration Matej Bajgar (OECD) Chiara Criscuolo (OECD) Jonathan Timmis (World Bank)
Big firms are getting bigger Evidence of rising industry concentration • US – Furman and Orszag (2015), Grullon et al. (2019), Autor et al. (2019). . . • Europe – Early studies NO CHANGE • Gutiérrez and Philippon (2018), Valletti et al. (2017), Social Market Foundation, 2017 – …vs. more recent ones • Bajgar et al. (2019); Valletti et al. (2019); De Ridder (2019) By Jolanda Casper © Pixels. com 2
Rising industry concentration Top 10% firms share in industry sales Concentration within countries in selected European countries (Multi. Prod) In 2012 the (weighted) share of sales accounted for by the firms in the top decile of the sales distribution is roughly 2. 2 p. p. higher than in 2001 Notes: Countries included are AUT, BEL, DEU, DNK, FIN, FRA, HUN, IRL, ITA, NLD, NOR, PRT, SWE. Included industries cover 2 -digit manufacturing and non-financial market services. Source: OECD Multi. Prod v 1. 1. Top 8 firms share in industry sales Europe as a single market (Orbis) In 2014 on average EU sectors had 2. 3 p. p higher concentration than in 2000 Notes: The countries include BEL, DEU, DNK, EST, ESP, FIN, FRA, GBR, GRE, HUN, IRL, ITA, LVA, NLD, NOR, POL, PRT, SVN and SWE for Europe and CAN and USA for North America. Included industries cover 2 -digit manufacturing and non-financial market services. Source: Orbis-Worldscope-Zephyr. Source: Bajgar et al. , (2019) “Industry Concentration in Europe and North America”, WP.
- What drives this? Related to productive investment or to market power? Policy response? 1. Clear evidence / stylised fact 2. sources and mechanisms underlying these trends 3. implications for business dynamism, innovation and growth. – The debate is still open: o Weakened Competition loose anti-trust and lobbying (Philippon): lower investment; higher prices, lowered output… o Reallocation to Superstar firms, thanks to new business models, globalization and technological change (Autor et al. , Bessen; Crouzet and Eberly): higher innovation, productivity growth (Ganapati, Bessen)
This paper 1. Clear evidence / stylised fact Ø New evidence on industry concentration trends across 11 European countries, United States and Japan over between 20022014 2. Understand sources and mechanisms underlying these trends Ø Role of intangibles investment, globalisation, digital technologies and regulation 3. Implications for business dynamism, innovation and growth. Ø Link concentration to dynamic and static competition
Concentration: measurement and stylised facts • Countries: BEL, DNK, ESP, FIN, FRA, GBR, GRC, ITA, JPN, PRT, SWE, USA Increase in 67% of country industries Increase in 11 out of 13 countries (unweighted), all countries (weighted)
The role of intangibles Haskel and Westlake, 2017 • Intangible investment: Innovative assets, computerised information, economic competencies(INTANInvest) • Tangible investment, digitalisation (Calvino et al, 2018), trade openness, product market regulations, industry output and prices (OECD)
Other factors at play Dependent variable: 4 -year change in industry concentration
The effect of intangibles stronger in globalised and digital sectors Dependent variable: 4 -year change in industry concentration
Driven by innovative property and computerised information Dependent variable: 4 -year change in industry concentration
Link to static and dynamic competition
Summary of results and broader research in mark -ups and business dynamism • Concentration increase in most countries and industries • Related to intangible investment (innovative and digital) • Complementarities with digital technologies and importance of openness given scalability • links to weakened dynamic competition and declining business dynamism (Calvino et al. ) Broader OECD-led cross-country research relying on different data sources shows: rise in intangibles and digital transformation are related to increase in mark-ups, wider dispersion in mark-ups (Calligaris et al. ) and in TFP performance, and slower catch-up Ø Role for policies: Innovation, IP, competition, regulation, data, but also (digital skills), financing… 12
THANK YOU! CHIARA. CRISCUOLO@OECD. ORG 13
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