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What happens when firms invest? Investment events and firm performance

Michał Gradzewicz ()

No 291, NBP Working Papers from Narodowy Bank Polski, Economic Research Department

Abstract: The aim of the study is to investigate the firm-level relationship between investment spikes and subsequent productivity developments. We used census data of Polish firms with employment above 9 persons, we measured investment spike and constructed a control sample for comparison. We showed various performance indicators before and after investment spike. We tested for the effects of a spike using generalized difference-in-difference models. The results suggest different effects for SMEs and larger companies. In smaller firms investment spike is associated with subsequent sales and employment expansion and lagged labor productivity rise, consistently with learning-by-doing model. TFP of smaller firms falls directly after a spike and only gradually rises thereafter. In larger firms investment spike also result in expansion of sales, but labor productivity is not improving relative to control group, despite a drop of employment. Moreover, capital deepening of larger firms results in significantly lower TFP, both in absolute and relative terms.

Keywords: investment spike; productivity; TFP; efficiency; firm-level data; difference-in-difference (search for similar items in EconPapers)
JEL-codes: D22 D24 L16 O3 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-cse, nep-ent and nep-sbm
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
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Persistent link: https://EconPapers.repec.org/RePEc:nbp:nbpmis:291

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