Declining business dynamism
Structural and policy determinants
This paper analyses trends in business dynamism across 18 countries and 22 industries
over the last two decades, using highly representative comparable data. It finds that
declines in business dynamism, pervasive in many countries, are driven by dynamics
occurring at a disaggregated sectoral level, rather than reallocation across sectors.
Average trends within sectors point to steady declines in each country over the last
two decades, even after accounting for the role of the business cycle, with market
structure and firm heterogeneity emerging as prominent determinants. Investments in
intangibles and digital technologies, globalisation, and changes in demographics also
contribute to these trends. Policy can, however, help boost business dynamism by reducing
barriers to entry and to knowledge diffusion, favouring experimentation and creative
destruction, and increasing absorptive capacity and firms’ potential to benefit from
technological change.
Published on November 10, 2020
In series:OECD Science, Technology and Industry Policy Papersview more titles