Born in hard times: startups selection and intangible capital during the financial crisis

Guzman Gonzales-Torres (guzman.gonzalestorres@bancaditalia.it), Francesco Manaresi (francesco.manaresi@bancaditalia.it) and Filippo Scoccianti (filippo.scoccianti@bancaditalia.it)
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Guzman Gonzales-Torres: Bank of Italy
Francesco Manaresi: Bank of Italy
Filippo Scoccianti: Bank of Italy

No 582, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We show that the credit crunch of 2007-2013 favoured the adoption by startups of more efficient, intangible-intensive technologies. Using data for the universe of Italian corporations, we document that the cohorts of firms born during the crisis significantly increased their share of intangible capital relative to both incumbents and comparable young firms born before the crisis. Moreover, the entry rates of intangible-intensive startups decreased by less than those of other firms. We estimate that this selection is directly linked to the tightening of credit conditions. We use a firm dynamics model to unveil the mechanism behind these patterns. Intangible goods make firms more efficient and profitable, reducing their demand of total capital and, crucially, their leverage at entry: this increases their resiliency to a financial shock. In the aggregate, a credit tightening changes the composition of new cohorts in favor of intangible-intensive producers, resulting in a persistent increase in intangible capital accumulation.

Keywords: firm dynamics; intangibles; startup; financial crisis (search for similar items in EconPapers)
JEL-codes: E22 E23 G32 (search for similar items in EconPapers)
Date: 2020-11
New Economics Papers: this item is included in nep-acc, nep-cfn, nep-ent, nep-fdg and nep-mac
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