Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/89417
Authors: 
Grazzi, Marco
Jacoby, Nadia
Treibich, Tania
Year of Publication: 
2013
Series/Report no.: 
LEM Working Paper Series 2013/06
Abstract: 
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.
Subjects: 
firm heterogeneity
investment spike
industrial dynamics
corporate performance
capital accumulation
technical change
JEL: 
C14
D22
D24
D92
E22
L11
L23
L60
Document Type: 
Working Paper

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