Foreign Competition and the Durability of US Firm Investments

Philippe Fromenteau (), Jan Schymik and Jan Tscheke

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: How does the exposure to product market competition affect the investment horizon of firms? We study if firms have an incentive to shift investments towards more short-term assets when exposed to tougher competition. Based on a stylized firm investment model, we derive a within-firm estimator using variation across investments with different durabilities. Exploiting the Chinese WTO accession, we estimate the effects of product market competition on the composition of US firm investments. Firms that experienced tougher competition shifted their expenditures towards investments with a shorter durability. This effect is larger for firms with lower total factor productivity.

Keywords: import competition; firm investment behavior; investment life-span; short-termism (search for similar items in EconPapers)
JEL-codes: D22 F14 F36 F65 G32 L20 (search for similar items in EconPapers)
Pages: 49
Date: 2019-04
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-com, nep-ind and nep-int
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Foreign competition and the durability of US firm investments (2019)
Working Paper: Foreign competition and the durability of US firm investments (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:bon:boncrc:crctr224_2019_082

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