The Effect of Technological Change on Firm Survival and Growth - Evidence from Technology Standards Justus Baron∗ Daniel F. Spulbery Northwestern University Northwestern University April 21, 2017 Abstract We analyze the effect of technological change on firm exits, establishment entry and exit, and the creation and destruction of jobs. We make use of a novel measure of technological change: technology standards. Replacements and withdrawals of standards provide information about technological obsolescence, whereas references among standards signal new uses for existing technologies. Relating standards to firm cohorts using the date of publication, we find that the withdrawal of standards induces a significant increase in the rates of firm deaths, establishment exits and job destruction in the firms associated with the replaced standards. New standards building upon existing standards however have the opposite effect, as firms associated with the technological vintage being referenced create new establishments at a higher rate. JEL-Classification: L15, L16, O33 Keywords: creative destruction, business dynamics, technological change, tech- nology standards ∗Corresponding Author. Research Associate, Searle Center on Law, Regulation, and Economic Growth, Northwestern University Law School, 375 East Chicago Avenue, Chicago, IL 60611. E-mail:
[email protected]. yElinor Hobbs Distinguished Professor of International Business, Department of Strategy, Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL, 60208, and Research Director, Searle Center on Law, Regulation, and Economic Growth, Northwestern University Law School, Chicago, IL. E-mail:
[email protected]. 1 Introduction Technological change has long been recognized as an important driver of economic growth (Solow, 1957). Business dynamics, including the entry and exit of firms, and the reallocation of labor through the creation and destruction of jobs in different firms, are another important driver of economic growth (Jovanovic, 1982).