Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 1454: Why Big Data Can Make Creative Destruction More Creative – But Less Destructive

Pehr-Johan Norbäck () and Lars Persson ()
Additional contact information
Pehr-Johan Norbäck: Research Institute of Industrial Economics (IFN), Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
Lars Persson: Research Institute of Industrial Economics (IFN), Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden

Abstract: The application of machine learning (ML) to big data has become increasingly important. We propose a model where firms have access to the same ML, but incumbents have access to historical data. We show that big data raises entrepreneurial barriers making the creative destruction process less destructive (less business-stealing) if the entrepreneur has weak access to the incumbent’s data. It is also shown that this induces entrepreneurs to take on more risk and be more creative. Policies making data generally available may therefore be suboptimal. Supporting entrepreneurs’ access to ML might be preferable since it stimulates creative entrepreneurship.

Keywords: Machine Learning; Big Data; Creative Destruction; Entrepreneurship; Operational Data

JEL-codes: L10; L20; M13; O30

Language: English

43 pages, February 22, 2023

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