Abstract
The rate of creative destruction increases in the U.S. during the period 1960 through 2008. We document statistically significant, increasing trends in big business turnover, changes in market share, the divergence in growth rates between firms that gain and lose market share, and other measures that show an economy that is increasingly characterized by creative destruction. We document a similar trend in financial dependence, with firm-growth rates increasingly surpassing rates that are sustainable with internal funds. We show that the increases in creative destruction and financial dependence are linked, as firms that gain market share rely on external finance to fund their growth, while firms that lose market share do not. We document similar effects in industry level tests. The results are broadly consistent with the notion that access to finance facilitates creative destruction.
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