|Fromenteau, Philippe; Schymik, Jan; Tscheke, Jan (12. Oktober 2016): Import Competition and the Composition of Firm Investments. Münchener Wirtschaftswissenschaftliche Beiträge (VWL) 2016-14|
We study how foreign competition affects the composition of investments inside firms. A parsimonious model predicts that firms have an incentive to shift their investments towards more short-term assets when exposed to tougher competition. Using data on expenditures of listed US companies into various asset classes with different lifespans, we document empirical evidence that is consistent with this prediction. Over a fifteen year period between 1995 and 2009, the rise in import competition is associated with a reduction of the firm-specific asset lifespan by about 4.5% on average. We additionally exploit the Chinese WTO accession as an exogenous shock in firm expectations about future exposure to competition.
|Dokumententyp:||Paper (Discussion Paper)|
|Keywords:||import competition, firm investment behavior, investment life-span, shorttermism|
Volkswirtschaft > Munich Discussion Papers in Economics
Volkswirtschaft > Munich Discussion Papers in Economics > Finanzwissenschaft
|Themengebiete:||300 Sozialwissenschaften > 330 Wirtschaft|
|JEL Classification:||F14, F36, F65, G32, L20, D22|
|Veröffentlicht am:||17. Okt. 2016 11:20|
|Letzte Änderungen:||17. Okt. 2016 11:34|
Aghion, Philippe, George-Marios Angeletos, Abhijit Banerjee, and Kalina Manova. Volatility and Growth: Credit Constraints and the Composition of Investment. Journal of Monetary Economics, 57(3):246–265, 2010.
Atkeson, Andrew G., Andrea L. Eisfeldt, and Pierre-Olivier Weill. Measuring the Financial Soundness of U.S. Firms, 1926-2012. Working Paper 19204, National Bureau of Economic Research, 2013.
Atkin, David, Azam Chaudhry, Shamyla Chaudhry, Amit K. Khandelwal, and Eric Verhoogen. Markup and Cost Dispersion across Firms: Direct Evidence from Producer Surveys in Pakistan. American Economic Review,105(5):537–44, 2015.
Autor, David H., David Dorn, and Gordon H. Hanson. The China Syndrome: Local Labor Market Effects of Import Competition in the United States. American Economic Review, 103(6):2121–68, 2013.
Autor, David H., David Dorn, and Gordon H. Hanson. The China Shock: Learning from Labor Market Adjustment to Large Changes in Trade. Working Paper 21906, National Bureau of Economic Research, 2016.
Bénabou, Roland and Jean Tirole. Bonus Culture: Competitive Pay, Screening, and Multitasking. Journal of Political Economy, 124(2):305–370, 2016.
Bernard, Andrew B., J. Bradford Jensen, and Peter K. Schott. Survival of the Best Fit: Exposure to Low-Wage Countries and the (Uneven) Growth of U.S. Manufacturing Plants. Journal of International Economics, 68(1):219–237, 2006.
Bernard, Andrew B., Stephen J. Redding, and Peter K. Schott. Multiple-Product Firms andProduct Switching. American Economic Review, 100(1):70–97, 2010.
Bloom, Nicholas. The Impact of Uncertainty Shocks. Econometrica, 77(3):623–685, 2009.
Bloom, Nicholas, Mirko Draca, and John Van Reenen. Trade Induced Technical Change? The Impact of Chinese Imports on Innovation, IT and Productivity. Review of Economic Studies, 83(1):87–117, 2016.
Bustos, Paula. Trade Liberalization, Exports, and Technology Upgrading: Evidence on the Impact of MERCOSUR on Argentinian Firms. American Economic Review, 101(1):304–340, 2011.
Coibion, Olivier, Yuriy Gorodnichenko, and Saten Kumar. How Do Firms Form Their Expectations? New Survey Evidence. NBER Working Papers 21092, National Bureau of Economic Research, Inc, 2015.
Dhingra, Swati. Trading Away Wide Brands for Cheap Brands. American Economic Review, 103(6):2554–84, 2013.
Eckel, Carsten and J. Peter Neary. Multi-Product Firms and Flexible Manufacturing in the Global Economy. Review of Economic Studies, 77(1):188–217, 2010.
Feenstra, Robert C. and Gordon H. Hanson. The Impact of Outsourcing and High-Technology Capital on Wages: Estimates for the United States, 1979-1990. Quarterly Journal of Economics, 114(3):907–940, 1999.
Foley, Fritz and Kalina Manova. International Trade, Multinational Activity, and Corporate Finance. Annual Review of Economics, 7(1):119–146, 2015.
Fresard, Laurent. Financial Strength and Product Market Behavior: The Real Effects of Corporate Cash Holdings. Journal of Finance, 65(3):1097–1122, 2010.
Garicano, Luis and Luis Rayo. Why Organizations Fail: Models and Cases. Journal of Economic Literature, 54(1):137–92, 2016.
Garicano, Luis and Claudia Steinwender. Survive Another Day: Using Changes in the Composition of Investments to Measure the Cost of Credit Constraints. Review of Economics and Statistics, forthcoming, 2016.
Gorodnichenko, Yuriy, Jan Svejnar, and Katherine Terrell. Globalization and Innovation in Emerging Markets. American Economic Journal: Macroeconomics, 2(2):194–226, 2010.
Guadalupe, Maria and Julie Wulf. The Flattening Firm and Product Market Competition: The Effect of Trade Liberalization on Corporate Hierarchies. American Economic Journal: Applied Economics, 2(4):105–27, 2010.
Handley, Kyle and Nuno Limão. Trade and Investment under Policy Uncertainty: Theory and Firm Evidence. American Economic Journal: Economic Policy, 7(4):189–222, 2015.
Hashmi, Aamir Rafique. Competition and Innovation: The Inverted-U Relationship Revisited. Review of Economics and Statistics, 95(5):1653–1668, 2013.
Iacovone, Leonardo, Ferdinand Rauch, and L. Alan Winters. Trade as an Engine of Creative Destruction: Mexican Experience With Chinese Competition. Journal of International Economics, 89(2):379 – 392, 2013.
Lileeva, Alla and Daniel Trefler. Improved Access to Foreign Markets Raises Plant-level Productivity... For Some Plants. Quarterly Journal of Economics, 125(3):1051–1099, 2010.
Manova, Kalina. Credit Constraints, Heterogeneous Firms, and International Trade. Review of Economic Studies, 80(2):711–744, 2013.
Mayer, Thierry, Marc J. Melitz, and Gianmarco I. P. Ottaviano. Market Size, Competition,and the Product Mix of Exporters. American Economic Review, 104(2):495–536, 2014.
Melitz, Marc J. The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity. Econometrica, 71(6):1695–1725, 2003.
Melitz, Marc J. and Gianmarco I. P. Ottaviano. Market Size, Trade, and Productivity. Review of Economic Studies, 75(1):295–316, 2008.
Novy, Dennis and Alan M. Taylor. Trade and Uncertainty. Working Paper 19941, National Bureau of Economic Research, 2014.
Pierce, Justin R. and Peter K. Schott. The Surprisingly Swift Decline of US Manufacturing Employment. American Economic Review, forthcoming, 2016.
Terry, Stephen J. The Macro Impact of Short-Termism. Discussion Papers 15-022, Stanford Institute for Economic Policy Research, 2015.
Utar, Hale. Workers Beneath the Floodgates: The Impact of Removing Trade Quotas for China on Danish Workers. Working Paper 12-2014, 2014.
Valta, Philip. Competition and the Cost of Debt. Journal of Financial Economics, 105(3):661–682, 2012.
Xu, Jin. Profitability and Capital Structure: Evidence from Import Penetration. Journal of Financial Economics, 106(2):427–446, 2012.