This paper studies how rising returns to scale contributed to declining business dynamism and increasing markups and expenditures devoted to customer acquisition in the U.S. economy. It introduces a firm dynamics model with heterogeneous markups and customer accumulation based on directed search, in which larger firms gain a competitive edge from higher returns to scale. This makes markets less contestable for new firms and leads to the rise of superstar firms. The model quantitatively accounts for a substantial share of these trends, and the underlying micro-level mechanisms align with empirical evidence. • Superstar firms contribute to secular trends: declining business dynamism, increasing markups, and higher spending on customer acquisition. • Rising returns to scale amplify differences among firms, driving the growth of superstar firms. • Novel directed-search model quantitatively explains a substantial fraction of these secular changes via rising returns to scale. • The model also aligns with several micro-level phenomena associated with these secular trends.