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Visualizing Creative Destruction

Batty, M; (2007) Visualizing Creative Destruction. (CASA Working Papers ). Centre for Advanced Spatial Analysis (UCL), UCL (University College London), Centre for Advanced Spatial Analysis (UCL): London, UK. Green open access

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Abstract

We introduce a series of methods for visualizing the dynamics of firmsize as indicative of the way the creation of new economic entitiesdestroy the existing order in the manner first sketched bySchumpeter (1938). We examine firm size distributions for every yearfrom 1955 to 1994 for the top 100 firms listed in the Fortune 500. Weshow that although rank-size distributions from this data areremarkably stable, this masks a much more detailed microdynamicswhere firms are changing their size and rank in the prevailing orderquite rapidly. These provide the signatures of creation anddestruction and to visualize their form, we introduce the idea of halflives, rank clocks and distance statistics which reveal a cornucopia ofdynamic behaviors. We first examine changes in firm size measuredby revenue earnings and then we contrast this with profits perearnings data which reveals another picture of these processes ofcreation and destruction. We introduce a series of methods for visualizing the dynamics of firmsize as indicative of the way the creation of new economic entitiesdestroy the existing order in the manner first sketched bySchumpeter (1938). We examine firm size distributions for every yearfrom 1955 to 1994 for the top 100 firms listed in the Fortune 500. Weshow that although rank-size distributions from this data areremarkably stable, this masks a much more detailed microdynamicswhere firms are changing their size and rank in the prevailing orderquite rapidly. These provide the signatures of creation anddestruction and to visualize their form, we introduce the idea of halflives, rank clocks and distance statistics which reveal a cornucopia ofdynamic behaviors. We first examine changes in firm size measuredby revenue earnings and then we contrast this with profits perearnings data which reveals another picture of these processes ofcreation and destruction.

Type:Working / discussion paper
Title:Visualizing Creative Destruction
Open access status:An open access version is available from UCL Discovery
Additional information:Imported via OAI, 7:29:01 16th May 2007
UCL classification:UCL > School of BEAMS > Faculty of the Built Environment > Centre for Advanced Spatial Analysis

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