2013/06 | LEM Working Paper Series | |
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Dynamics of Investment and Firm Performance: Comparative evidence from manufacturing industries |
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Marco Grazzi, Nadia Jacoby, Tania Treibich |
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Keywords | ||
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Firm heterogeneity, investment spike, industrial dynamics, corporate performance, capital accumulation, technical change
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JEL Classifications | ||
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C14, D22, D24, D92, E22, L11, L23, L60
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Abstract | ||
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If the relation between investment and economic growth is well
established in the macroeconomic literature, the existence of a
similar link at the level of the firm has been challenged by empirical
work. This paper investigates the channels linking investment and firm
performance in the French and Italian manufacturing industries. It
does so by putting forth a novel methodology to identify investment
spikes that corrects for size dependence. While maintaining the
desired properties of a spike measure, our chosen proxy retrieves the
expected relation between investment and firm performance. Ex-ante,
more efficient and fast growing firms display a higher probability to
invest; in turn, after an investment spike has taken place the group
of investing firms shows further gains in performance. Finally,
expansionary investment episodes, as proxied by the opening of new
plants, have a negative effect on profitability while they are
associated with higher sales and employment levels.
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Downloads | ||
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