After powering U.S. prosperity for over a century, labor productivity growth has languished for most of the past two decades. But a recent surge presents a critical question: can the United States turn its latest productivity gains into a period of sustained growth? The answer will determine the nation’s future competitiveness, especially in light of the promise of artificial intelligence against converging challenges like an aging population, geopolitical tensions, the push to reshore manufacturing, rising debt levels and broad economic uncertainty.

For companies, productivity growth is the primary tool with which to face competition, and the only sustainable way to elevate profits, please customers, and raise employee compensation at the same time. For countries, it pays for increasingly critical demands from defense to the energy transition by expanding the pie and thus countering zero-sum thinking as well as political polarization.

The challenge, by the way, is not confined to the United States. Since 2000, labor productivity growth has languished in most advanced economies, with many posting even smaller gains than the United States.

But if you think most productivity gains come from incremental improvements in efficiency across the broad swath of firms – or even from adopting new technologies like AI – think again. The reality is both more sporadic and more inspiring: there’s strong evidence that a small cadre of standout companies making bold, strategic moves drive national productivity growth. This conclusion, drawn from a detailed analysis of thousands of firms, flies in the face of conventional wisdom and suggests the need for fresh thinking on the part of both business leaders and policymakers.

Today all eyes are on AI. Pundits debate how much breakthroughs in large language models and their widespread applications across traditional businesses will matter. But our research points to a different point of leverage for country-wide productivity gains: how will ambitious large or fast-growing firms use technology at scale to create new value through new business models, new customer value propositions or sweeping operational transformations?

The Study

In our latest productivity research, we zoom in on firm-level contributions to productivity growth in four sectors (retail, automotive and aerospace, travel and logistics, and computers and electronics) for the United States as well as Germany and the United Kingdom. With detailed data for each country’s companies, we measured the contributions that individual firms made to total productivity. We used the period 2011 to 2019, but also crosschecked conclusions with data through 2023. The study allows us to see how productivity accrues firm by firm, and even worker by worker.

Productivity Standouts

The results were striking. From our total sample of 8,300 firms, fewer than 100 – a group that we dub “standouts” – accounted for approximately two-thirds of the total productivity gains in the three countries. Numbers were even as striking in the United States. There, roughly 5 percent of firms powered 78 percent of the country’s productivity growth.

U.S. standouts included household names like Amazon, Delta Air Lines and The Home Depot. Between 2011 and 2019, U.S. productivity growth in our sample of firms averaged 2.1 percent annually, far outpacing 0.2 percent growth in our German sample and virtually zero growth in the British sample. U.S. firms enjoy broad structural advantages including a less fragmented domestic market, more innovation- and investment-friendly regulation and a mature risk-capital ecosystem.

To give a sense of how important a single standout can be, consider that in the United States, adding another 30 standout companies of comparable size could have doubled aggregate productivity growth. That is the power of the top productivity contributors.

On the flip side, the firms that were responsible for the largest drag on productivity – we call them stragglers – formed a smaller group that also had outsized impact. In the United States, under 2 percent of firms in our sample were stragglers, but they were responsible for 57 percent of negative productivity growth.

Where to Find Standouts

Standouts drove the bulk of gains in almost all subsectors that experienced rapid productivity growth (defined as at least 2 percent per year). The relationship between standouts and sector growth is a symbiotic one. Standouts drive growth, but some sectors also have more promising conditions in terms of their market dynamics, technology, regulation and competitive settings to breed more standouts.

We found greater numbers of standout firms in sectors where participants could create new customer value and scale new business models than we did in sectors where success was largely driven by cost-cuts. To that point, across four sectors in our sample, about half of U.S. standout firms were in computers, semiconductors and electronic equipment.

Creative Destruction Redefined

We found that much of the United States’ productivity edge was driven by its dynamic reallocation of labor. Productive firms scaled up more rapidly, while underperformers shrank or exited faster. Among U.S. standouts, we see both high-productivity firms that expanded their workforces – like Apple and Amazon – as well as low-productivity firms that improved national productivity by shedding jobs or exiting altogether like Sears. In contrast, both Germany and the United Kingdom held on to their underperforming firms as stragglers, with fewer exits and limited workforce shifts.

This dynamism mattered. In the United States, the combined effect of firm scaling and exiting added 0.9 percentage points to productivity growth – nearly half the 2.1-percent total in the sample. In Germany and the United Kingdom, by contrast, labor reallocation made almost no contribution to growth.

U.S. policymakers and researchers have long recognized the importance of creative destruction. But too often, tracked statistics and investigations focus on the rate of firm entries and exits. In fact, new entrants do not do much for macroeconomic productivity: they remain too small and unproductive for too long to move the needle. Instead, the upside is measurable among leading firms that scale up ever further. Note, too, that the exits of low-productivity firms – especially larger ones with business models that are no longer viable – also contribute significantly.

Who Are the Standouts?

To better grasp what makes a standout in our analysis, we grouped firms according to how they drove productivity in their sector. At the top of the list, “improvers” were large firms that made bold moves to advance their productivity levels (per worker) for many workers. Most standouts in our study are in this group, especially large incumbents like United Airlines that made meaningful improvements by changing business strategies, value-added portfolios and scale.

Next, “scalers” started out above their sector’s average productivity levels and then hired more people, thereby driving national productivity growth mostly via employment reallocation. In our study, about 20 percent are counted as scalers; Amazon and Apple are notable among them.

Almost the mirror image of scalers, “restructurers” are less productive firms that made a positive contribution by reducing their employment share or exiting the market altogether – like Sears in retail. Finally, “disruptors” grew productivity and share very rapidly, but actually made the smallest quantitative contributions when we crunched the numbers. About 10 percent of standouts started 2011 as smaller disruptors. Examples are varied, ranging from Germany’s e-commerce player Zalando to Nvidia in the U.S.

Standouts with the most muscle to move the productivity needle for an entire economy are generally bigger incumbents. In fact, in the United States, the youngest firm in our eight-year sample was 11 years old and the average age was 60 – similar to the age distributions in the global sample. While younger, smaller and more niche-based firms may raise productivity at a faster pace, it takes time to develop the scale needed to make a dent in national productivity.

But while being large helps, size alone does not make a standout. In fact, while large firms are more likely than small ones to be standouts, they are also much more likely to be stragglers.

By the same token, while some standouts remain as top productivity contributors for many years, numerous ones drop in and out of the elite group over time. About two-thirds of all our 2011-19 standout firms (and nearly three-quarters of those in the U.S. sample) remained top contributors in the 2019-23 period. The other fraction fell back, with new firms taking their places. The story of productivity is bound closely to the story of flexibility and change.

The Making of a Standout

Standout firms have little in common, at least at first glance. Their shared trait is not superior efficiency but a penchant for doing things differently and doing different things. Decision makers, take note.

Detailed case studies of standouts across all four sectors – retail, automotive and aerospace, travel and logistics, and computers and electronics – reveal a pattern. Standout firms tend to mainly rely on five strategic moves, often in combination.

Scaling more productive business models or technologies. For example, Apple shaped the mobile internet wave, rolling out its core iPhone business with new services, including Apple Music, iCloud and the App Store. As Apple was shaping mobile, Amazon was doing something similar for retail with ecommerce.

Shifting toward the most productive geographies and product lines. Standouts Apple and Broadcom moved into higher-margin services, General Motors withdrew from underperforming regional markets and Amazon branched into cloud-computing via Amazon Web Services.

Recasting customer value propositions. This strategy applies across markets – from mass to high-end niche – and it often comes in response to trends or competitive attack. For instance, The Home Depot improved both its physical stores and online integration to appeal to customers. Nvidia built a winning value proposition for graphics processing units and scaled it up.

Building scale and network effects. Examples of firms expanding scale include U.S. airlines, with their M&A activities that helped them improve route networks and aircraft capacity utilization, and Amazon, which broadened access to its fulfilment infrastructure to benefit both shoppers and partner retailers.

Transforming operations to make them more efficient and cut external costs. While this is the efficiency most commonly associated with productivity growth – at least among businesses – it was rarely the most important one in our case studies. This does not mean it doesn’t matter, though. Almost all firms try to improve their efficiency and work to reduce costs constantly, and rightly so. But a focus on efficiency is rarely enough to become a productivity standout, except via large transformational programs.

These strategic moves often spark chain reactions, bursts of productivity that trigger more actions and responses. For instance, the success of Amazon in U.S. retail not only directly boosted productivity but also prompted responses from other firms. The Home Depot, in response to the e-commerce trend, reshaped value propositions in its own ways with online shopping and pick-up-in-store concepts, as well as closer customer proximity with a denser store network.

Revisiting Productivity Policy

Policymakers would do well to take productivity seriously – not as an abstract macroeconomic metric but as a national imperative. Though often overshadowed by top-line growth and bottom-line profits at the company level, productivity is the rare force that benefits employees, consumers, shareholders and economies alike. Here are five important thrusts for decision makers to consider, some new and some evergreen, that warrant renewed emphasis.

Let leading innovators respond to scale incentives. Promising firms should have room to run to drive productivity growth. That doesn’t mean giving monopolists a free pass – anticompetitive behavior should, of course, be curtailed to keep the market dynamic. Standouts and stragglers change over time, and they need to continue to do so. But competition policy should aim to maximize firms’ contributions to productivity, and that includes leaders’ ability to increase scale. Great economies are built with great enterprises.

Focus innovation and industrial policy on creating standouts. Industrial policy is often fixated on supporting “national champions” without serious consideration of whether these firms are (or are in the process of becoming) standouts or stragglers. On top of that, innovation policy tends to be spread thinly across millions of small and young firms. Only a handful of startups will have the ambition and ability to grow and generate meaningful gains at scale. With innovation policy, there’s good reason to start with a very wide funnel. But there’s also good reason to discipline access promptly in order to better fund the most productive and ambitious firms on a national level.

Don’t prop up ailing incumbents. The reallocation of labor and resources away from low-productivity firms toward higher-performing ones has long been recognized by academic researchers as a driver of medium-term productivity gains. Comparisons with the EU and UK make clear that without a steady dose of creative destruction, economies risk forfeiting half of their productivity potential.

Our research offers new evidence to underscore the importance of letting ailing firms restructure or exit. And it shows the particular importance of steering larger stragglers to change or exit for the sake of national productivity spikes. Yes, these transitions are painful, especially for the workers and communities involved. But instead of trying to prop up poor performers, it would be better to provide resources to facilitate turnarounds or nurture new standouts.

Make input markets more dynamic. Factor markets are where businesses get the resources they need – labor, raw materials, land and capital. Training assistance and the offer of portable benefits can help make it easier for workers to find new jobs. Moreover, flexibility must not stop with labor. How flexible, for instance, are urban land markets? What product market regulations and permitting red tape stand in the way of leaders’ growth? Policy adjustments can help businesses get the resources they need to thrive.

Look at the micro as well as the macro picture. Standard economic indicators often fail to capture the more granular sources of productivity growth on the ground. A refined approach would track the contributions of individual firms to aggregate productivity. Governments might task national statistics offices or economic councils with developing annual micro-to-macro productivity models – tools that could illuminate which firms, sectors and regions are truly driving progress. Companies themselves should put their productivity metric front and center.

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For too long, the link between firm-level dynamics and aggregate growth has been blocked in a black box. Cracking open the box can yield actionable insights – and a more targeted playbook for both business and policymakers. To sustain the U.S.’s recent productivity acceleration, our research suggests it makes sense to identify which firms are positioned to contribute the most as they further scale and improve. Standout firms don’t just tweak operations. They reshape whole industries, scale innovative business models and leverage technologies like AI in transformative ways.