Globalization and Profitability of US Firms: The Role of Intangibles

Bullipe R. Chintha, Ravi Jagannathan and Sri S. Sridhar

No 32202, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: China's admission into the WTO in 2001 heralded a new era of globalization, increasing both import competition in domestic markets and foreign opportunities for US firms. In the aggregate, the average annual profitability of US public firms during the post globalization period (2003-2019) increased by 11.5% of the corresponding pre-globalization period (1984-2002) profitability. This increase in overall aggregate profitability was primarily driven by foreign profitability increasing by 47.4% for firms in the S&P 500 index, which are larger and have more intangible assets created by R&D and SG&A expenditures. In contrast, following globalization, the average aggregate domestic profitability of US firms remained flat, and firms employed more capital to generate sales. Firms with higher intangible assets benefited more from globalization.

JEL-codes: F20 F30 G0 G12 G30 L1 L25 (search for similar items in EconPapers)
Date: 2024-03
New Economics Papers: this item is included in nep-cna, nep-eff, nep-his, nep-ifn, nep-int and nep-sbm
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