Institution(s): School of Economics and Finance, Hong Kong Institute of Economics and Business Strategy

Date: Jun 19, 2001 (Tuesday)

Time: 05:30 pm - 06:30 pm

Venue: Rayson Huang Theatre, The University of Hong Kong, Pokfulam Road, Hong Kong

Medium: English

Fee: Free of Charge


The new economy has more creative destruction. Firms that enter the stock market have to climb a much higher hurdle to arrive there. The hurdle is part of their intangible capital and their market-to-book values are therefore higher. With entering firms establishing themselves faster than before, prices are more volatile because less is known about the firms' prospects. The rise to the top is more rapid than ever, and several present-day giant firms are younger than past blue-chip companies. Since ideas, which are intangibles, yield positive external effects, they matter more than before. It follows that the private optimal rate of entry is even farther below the social optimal rate of entry. Putting it another way, the time to encourage small business start-ups is now. Stock market bubbles are bad for investors who end up losing their fortunes when the bubbles burst. However, they are good for the economy because they induce more start-ups.

Boyan Jovanovic holds a Bachelor's and Master's degree from the London School of Economics, and a Ph.D. in Economics from the University of Chicago. He has taught at Columbia University, New York University, the University of Pennsylvania and Yale University, and is now at the University of Chicago. A fellow of the Econometric Society, he is currently an editor of the Review of Economic Dynamics. He has worked on questions in labor economics, industrial organization, monetary economics and development and growth. Most recently, he has studied how technology affects the economy, with special reference to large technological waves, to the stock market, and to the performance of different generations of firms.


Professor Boyan Jovanovic
Prof. Y.C. Richard Wong, Mr. Andrew Sheng, and Prof. Boyan Jovanovic