Template-Type: ReDIF-Paper 1.0
Title: Foreign Competition and the Durability of US Firm Investments
Author-Name: Philippe Fromenteau
Author-Email: philippe.fromenteau@econ.lmu.de
Author-Name: Jan Schymik
Author-Email: jschymik@mail.uni-mannheim.de
Author-Name: Jan Tscheke
Author-Email: jan.tscheke@oecd.org
Classification-JEL: F14, F36, F65, G32, L20, D22
Keywords: import competition,  firm investment behavior, investment life-span, short-termism

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.

Note: 
Length: 49
Creation-Date: 2019-04
Revision-Date: 
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp082
File-Format: application/pdf
Handle: RePEc:bon:boncrc:CRCTR224_2019_082