Expansionary Investment Activities: Assessing Equipment and Buildings in Productivity

Jasper Brinkerink, Andrea Chegut and Wilko Letterie ()
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Jasper Brinkerink: Free University of Bozen-Bolzano
Andrea Chegut: Massachusetts Institute of Technology, Center for Real Estate
Wilko Letterie: Maastricht University

A chapter in Advances in Efficiency and Productivity Analysis, 2021, pp 303-333 from Springer

Abstract: Abstract We study firm-level expansionary investment activities in both equipment and buildings—the so-called investment spikes. Our identification strategy decomposes firm investment spikes into three streams: a spike in equipment only, buildings only, or a simultaneous spike. Empirically, we find that the timing and size of investment in equipment and buildings are not independent. Firms conducting a simultaneous spike enhance firm scale more than in the case of a spike in equipment or buildings alone. Employment growth occurs when a firm builds structures. Investment in equipment affects the optimal input mix and high productivity in equipment and buildings provides investment timing signals. In low-tech sectors firm production growth depends on investment in buildings. In contrast, a necessary condition for firms in high-tech sectors to grow their production is investment in equipment.

Keywords: Investment spikes; Equipment; Buildings; Interrelation; Scale; Productivity; Input mix; Efficiency; Low- and high-tech; Labour intensity (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-030-47106-4_13

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DOI: 10.1007/978-3-030-47106-4_13

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