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Entrepreneurships, the New Economy and Public Policy pp 33–54Cite as

Risk, variety and volatility: growth, innovation and stock prices in early industry evolution

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Abstract

The paper studies the patterns of volatility in firm growth rates and stock prices during the early phase of the life-cycle of an old economy industry, the US automobile industry from 1900–1930, and a new economy industry, the US PC industry from 1974–2000. In both industries, firm growth rates are more volatile in the period in which innovation is the most “radical”. This is also the period in which stock prices are more volatile. The comparison sheds light on the co-evolution of industrial and financial volatility and the relationship between this co-evolution and mechanisms of Schumpetarian creative destruction. Results provide insight into the debate on whether the statistical behavior of firm growth rates is well represented by Gibrat’s Law.

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Author information

Authors and Affiliations

  1. Economics Department, The Open University, Walton Hall, Milton Keynes, MK7 6AA, UK

    Mariana Mazzucato

Authors
  1. Mariana Mazzucato
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Editor information

Editors and Affiliations

  1. Faculty of Economics and Business Administration Chair for Microeconomics, Friedrich-Schiller-University of Jena, Carl-Zeiss-Str. 3, 07743, Jena, Germany

    Uwe Cantner

  2. Department of Economics, University of Florida, Gainesville, FL, 32611, USA

    Elias Dinopoulos

  3. Graduate School of Business, University of Florida, 201 Bryan Hall, Gainesville, FL, 32611-7150, USA

    Robert F. Lanzillotti

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© 2005 Springer-Verlag Berlin Heidelberg

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Mazzucato, M. (2005). Risk, variety and volatility: growth, innovation and stock prices in early industry evolution. In: Cantner, U., Dinopoulos, E., Lanzillotti, R.F. (eds) Entrepreneurships, the New Economy and Public Policy. Springer, Berlin, Heidelberg. https://doi.org/10.1007/3-540-26994-0_4

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