Young firms, old capital

Song Ma, Justin Murfin and Ryan Pratt

Journal of Financial Economics, 2022, vol. 146, issue 1, 331-356

Abstract: Across a broad range of equipment types and industries, we document a pattern of local capital reallocation from older firms to younger firms. Start-ups purchase a disproportionate share of old physical capital previously owned by more mature firms. The evidence is consistent with financial constraints driving differential demand for vintage capital. The local supply of used capital influences start-up entry, job creation, investment choices, and growth, particularly when capital is immobile. Meanwhile, as suppliers of used capital, incumbents accelerate capital replacement in the presence of younger firms. The evidence suggests previously undocumented benefits to co-location between old and young firms.

Keywords: Entrepreneurship; Capital reallocation; Investment (search for similar items in EconPapers)
JEL-codes: E22 G31 L26 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:146:y:2022:i:1:p:331-356

DOI: 10.1016/j.jfineco.2021.09.017

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