The Few Who Move the Many: Standout & Straggler Firms in Leading-Country Industrial Productivity
Very interesting indeed from the Jan Mischke-led MGI team. In leading technological-frontier economies, real economic growth and change may well come in seismic bursts, often led by a single company. The story appears to be not one of slow diffusion, but of a handful of risk-takers dragging the rest of us, often unwillingly, into the more productive future. What does this mean for policy, wages, and the future of economic dynamism?…
Chris Bradley & Jan Mischke: The Heroes of Productivity <[www.project-syndicate.org/commentar...](https://www.project-syndicate.org/commentary/productivity-growth-driven-by-standout-firms-outweighing-stragglers-by-chris-bradley-and-jan-mischke-2025-05>:) ‘Productivity growth…. New research from the McKinsey Global Institute shows that the lion’s share comes from just a few firms making audacious moves.… 8,300 companies in Germany, the United Kingdom, and the United States… retail, automotive and aerospace, travel and logistics, and computers and electronics… between 2011 and 2019….
Fewer than 100 productivity “standouts” account for two-thirds of the sample’s growth… a much more extreme concentration than the prevailing view of productivity would suggest…. Standouts… in our sample, they pursued five strategic plays… [1] scaling more productive business models or technologies… [w] shifting regional and product portfolios toward the most productive [uses]… [3] reshaping customer value propositions… [4] building scale and network… and [5] transforming operations to boost labor efficiency…. Our case studies highlight Apple’s strategic expansion into services, EasyJet shaping the discount airline trend, and Zalando pioneering apparel e-commerce….
The 44 US standouts outnumbered the 14 stragglers by a factor of three. By contrast, the UK had a more even distribution, with 30 standouts and 25 stragglers, whereas Germany had 13 standouts and 16 stragglers. But it’s not just about having standouts; resources must be shifted toward them. The US was itself a standout in this respect, with half its productivity growth coming from reallocating labor away from stragglers and toward the vanguard…
What follows from this and other similar studies of the concentration of productivity growth in the richest technology-frontier countries?
Focus on the multifaceted nature of the modern large firm. Such firms function as:
technology-forcers—agents that introduce, develop, and diffuse new technologies;
production-network orchestrators: valuable for stakeholders as key nodes in complex webs of suppliers, customers, and partners, enabling the creation of substantial economic value for each participant;
investment vehicles—repositories for capital seeking returns, whether through dividends, stock appreciation, or other financial mechanisms;
casino gambling roulette wheels—arenas for speculation, where fortunes are made and lost based on the perceived future prospects of the enterprise; and
meme-stock symbols and gestures—pledges of econo-cultural allegiance, as seen in recent years with the rise of GameStop and AMC, where stock ownership becomes a form of identity politics.
The first three of these are clearly useful. The fourth is a toll that those who suffer from the gambling drive pay, a toll that can be harnessed to create liquidity for the good of others. The fifth is just weird, especially these days.
I had already long thought that the first role, that of the firm as a technology-forcer, is the most important for economic growth and prosperity. Studies like this one from MGI suggest that that is even more crucial than I had previously appreciated.
Consider a canonical example: Apple’s creation of the modern smartphone market. It created a new category of consumer electronics. It also forced competitors to imitate Apple’s innovations and attempt to further innovate themselves, or die. Most died.
The same could be said of Toyota’s introduction of lean production or Amazon’s relentless pursuit of logistics efficiency. These are, none of them, incremental improvements diffused gently across the economy; they are seismic shifts in leading sectors, often led by a single firm willing to take risks, invest heavily, and, crucially, force others to respond.
Economic history is full of such moments: the Ford Motor Company’s assembly line, IBM’s mainframe dominance, Intel’s microprocessor revolution. The lesson is clear: technological dynamism is not a collective endeavor, but rather the result of a few audacious actors dragging the rest of us, sometimes kicking and screaming, into the future.
Next, we must ask: what share of the society-wide benefits generated by these standout firms is internalized by the firms themselves? How large are the incentives to push technologies of nature manipulation and human coöperative organization forward? When a firm like Apple expands, does it significantly raise real wages across the economy? The evidence suggests not. The effect of a single firm’s expansion on overall wage levels is, in most cases, vanishingly small. The bulk of the gains—higher wages, greater profits—are captured within the firm, accruing to its workers and shareholders. The “spillover” effects, though real, are limited at the level of the individual firm. This is not to say that such firms do not matter for the broader economy—they most certainly do—but rather that the transmission mechanism from firm-level success to society-wide prosperity is, in this channel, weak.
Your standard-issue economist would then say that there is no case for government action here: The societal returns to the decisions of the firm are felt by the firm on its bottom line. No external benefits (or costs). Hence no case for monkeying with the von Hayekian discovery procedure that is the market.
But a firm is not a rational Benthamite entity responding to pleasure and pain in order to maximize its utility. Managers would need to have the information, the incentives, the organization structures, and the bureaucratic procedures to pursue profit maximization with relentless focus. But, as any student of management—or, for that matter, of organizational behavior—quickly learns, this is a convenient fiction. Firms are not homunculi with a single brain. Firms are sprawling, multi-layered social systems, riven with principal-agent problems, informational bottlenecks, and the inevitable friction of bureaucratic inertia. Given the huge range of economies of scale and scope in the modern economy, the fact that there are multiple firms in the same line of business is a sign that this deviation of firm behavior from profit maximization is large. Information gets distorted as it moves up and down the hierarchy; feedback loops are often delayed or broken; local satisficing trumps global rationality.
Take, for instance, the infamous case of Kodak—a firm that, by the 1980s, had every financial incentive to embrace digital photography but whose internal structure (and perhaps culture) militated against it. The engineers in R&D saw the writing on the wall. The accountants, however, saw only the short-term threat to the high-margin film business. The result was a slow-motion train wreck: a firm that, despite having invented much of the relevant technology, failed to reorient itself in time.
Or consider the more recent example of Boeing, where the drive for short-run shareholder value—expressed through aggressive cost-cutting and outsourcing—undermined the firm’s ability to maintain quality and safety in its engineering processes, leading to the 737 MAX debacle.
When the market provides the right signals it will not matter much when the organizational machinery that interprets and acts on those signals is often deeply flawed. Thus, the standard economist’s case against intervention—claimed to be rooted in the assumption of rational, utility-maximizing firms—rests on a very different foundation that is, at best, highly contingent. What is that foundation? That there is no state capacity to take a longer view than that of the firm considered as a satisficing cybernetic entity under the gun of financial-market weirdness.
Moreover, the story does not end there. The technology-demonstration and -forcing effects—the impacts of standout firms on their competitors—is, I think, considerably larger than the stakeholder-value effect. When a firm pioneers a new technology or business model, competitors are forced to imitate or risk obsolescence. This emulation drives productivity gains across entire sectors. For example, Walmart’s mastery of supply chain management in the 1990s forced rivals like Target and Kmart to up their game, leading to a sector-wide transformation in retail logistics. Similarly, the adoption of just-in-time manufacturing, pioneered by Japanese automakers, eventually became the global standard. In this way, the benefits of innovation are not confined to the innovator; they diffuse, often rapidly, through the process of competitive emulation. Here, the “spillovers” are substantial, and the social returns to innovation can far exceed the private returns captured by the pioneering firm.
The direction of the policy implication is clear: there are large potential benefits to be gained from subsidizing successful standout firms—not only their innovation, but also their expansion. Traditional industrial policy has often focused on supporting struggling sectors or spreading best practices among laggards. Yet, if the real action is concentrated among a handful of standout firms, then perhaps resources would be better spent helping those firms scale up and diffuse their innovations more widely. What forms might this take? Targeted R&D subsidies? Support for workforce training? Permitting reforms that facilitate rapid expansion?
The history of Silicon Valley, with its admixture of public research funding, private venture capital, and a permissive regulatory environment, is potentially instructive here, at least as far as addressing these problems in leading sectors in the modern industrial ecology of the richest nations as we transition from the globalized value-chain economy to the attention info-bio tech economy?
And what about the laggard firms?
Finally, the comparative question: what is the United States doing right that Britain and Germany are not? The data show that the U.S. has both more standout firms and a greater willingness to reallocate resources—capital, labor, managerial talent—from stragglers to standouts. This is not merely the result of laissez-faire ideology, but of a complex interplay between market dynamism, labor mobility, deep capital markets, and a culture that, for all its faults, celebrates risk-taking and tolerates failure. By contrast, Europe’s more rigid labor markets, risk-averse financial systems, and penchant for preserving incumbents may inhibit the emergence and scaling of standout firms.
The lesson, I guess, is that fostering economic dynamism is less about propping up the many than about unleashing the few, and then relying on Schumpeterian creative-destruction to push resources around.
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