Three Essays on Superstar Firms

Abstract

Superstar firms play a significant role in driving productivity and innovation in the US and elsewhere. The phenomenon of superstars has gained considerable attention in the economics and policy literature as these firms are pulling ahead of the competition in terms of productivity, market share and sales and have exerted significant impacts on economies. How do these firms achieve superstar status? What can we learn from understanding how firms achieve superstardom? These are the fundamental questions to which this thesis aims to provide insights. Current research, primarily from economists, identifies various external (e.g., regulations) or internal (e.g., productivity, investment in IT or R&D) factors as being amongst key drivers of superstars. The management literature argues that firms combine key resources with unique capabilities to unlock their full potential. Building upon these arguments, this thesis offers an alternative theory that incorporates recent changes in market dynamics, firms' fundamental decisions, internal characteristics, and resources to explain the rise of superstar firms. The study introduces a novel definition of superstars and explores explanations for their emergence from three main perspectives. First, it examines the economic process through which superstars are formed, investigating in particular scale economies, firms' initial characteristics, and their relationship to winner-takes-all market dynamics (Paper 1). Second, it investigates the fundamental drivers of superstars, focusing on internal investment allocations and the role of top management teams (TMT). Specifically, it explores the impact of different TMT characteristics and identifies the clusters/configurations of attributes that contribute the most to firms achieving superstardom status (Paper 2). Third, the study leverages the resource-based view and dynamic capabilities theory to examine the complementary effect of intangible capital and marketing capability, both of which are critical for firms' extraordinary success and the likelihood of them attaining superstar status(Paper 3). To address these research objectives, large datasets including Compustat, Boardex, US patents, US trademarks, Capital IQ, etc., are merged. Innovative econometric and machine learning approaches are employed to derive and enhance existing measures of the main variables. Additionally, the study builds on previous theories to propose a novel theory of superstars, offering additional insights into the factors that enable superstar firms to attain their status. The findings reveal that economies of scale amplify firms' initial conditions, playing a significant role in facilitating their emergence in a winner-takes-all market dynamics. Moreover, the study sheds light on the role of top management teams and various clusters of TMT characteristics in firm superstardom. Furthermore, it demonstrates the importance of marketing capability, intangible capital, and especially their complementarity in contributing to firms' chances of attaining superstar status. Lastly, the study provides implications for managers and policymakers.

Date of Award	11 Jan 2024
Original language	English
Awarding Institution	The University of Manchester
Supervisor	Ronald Ramlogan (Main Supervisor) & Mohammad Salehnejad (Co Supervisor)