The Adoption of Non-Rival Inputs and Firm Scope

Xian Jiang and Hannah Rubinton

No 11028, CESifo Working Paper Series from CESifo

Abstract: Custom software is distinct from other types of capital in that it is non-rival—once a firm makes an investment in custom software, it can be used simultaneously across its many establishments. Using confidential U.S. Census data, we document that while firms with more establishments are more likely to invest in custom software, they spend less on it as a share of total capital expenditure. We explain these empirical patterns by developing a model that incorporates the non-rivalry of custom software. In the model, firms choose whether to adopt custom software, the intensity of their investment, and their scope, balancing the cost of managing multiple establishments with the increasing returns to scope from the non-rivalrous custom software investment. Using the calibrated model, we assess the extent to which the decline in the rental rate of custom software over the past 40 years can account for a number of macroeconomic trends, including increases in firm scope and concentration.

Keywords: technology adoption; non-rivalry; concentration; firm scope (search for similar items in EconPapers)
JEL-codes: D24 E22 O33 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-eff, nep-ict and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp11028.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_11028

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().