Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/156368
Authors: 
Fromenteau, Philippe
Schymik, Jan
Tscheke, Jan
Year of Publication: 
2016
Series/Report no.: 
Munich Discussion Paper 2016-14
Abstract: 
We study how foreign competition affects the composition of investments inside firms. A parsimonious model predicts that firms have an incentive to shift their investments towards more short-term assets when exposed to tougher competition. Using data on expenditures of listed US companies into various asset classes with different lifespans, we document empirical evidence that is consistent with this prediction. Over a fifteen year period between 1995 and 2009, the rise in import competition is associated with a reduction of the firm-specific asset lifespan by about 4.5% on average. We additionally exploit the Chinese WTO accession as an exogenous shock in firm expectations about future exposure to competition.
Subjects: 
import competition
firm investment behavior
investment life-span
shorttermism
JEL: 
F14
F36
F65
G32
L20
D22
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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