Dr. Anup Srivastava, Canada Research Chair in Accounting – Decision-Making and Capital Markets at the Haskayne School of Business, University of Calgary, discusses his research titled “Do Digital Technology Firms Earn Excess Profits? Alternative Perspectives.” In this study, he explores whether digital technology firms particularly major tech giants truly earn excess profits, and examines whether such profitability arises from market power or from innovation.
Professor Anup Srivastava’s research on digital technology giants tackles a central policy question: do firms like Amazon, Apple, Microsoft, Meta, and Google truly earn excess profits, and if so, why. He shows that traditional accounting metrics such as return on assets systematically mismeasure the performance of knowledge-intensive firms because they expense critical intangible investments like R&D, data, and brand-building, making the most innovative companies appear unprofitable on paper. By instead using internal rate of return and correcting for both profits and invested capital, his work documents that digital tech firms have generated supernormal returns, often between 30 and 60 percent far above their cost of capital in an era of low interest rates. The evidence points to a mix of powerful innovation (new markets, long-horizon investments, high-value patents) and significant market power (dominant platforms, high switching costs, data advantages), leaving regulators, investors, and corporate leaders with the nuanced task of distinguishing value-creating innovation from rent-extracting behavior in the digital economy.
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