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Young Firms, Old Capital

Author

Listed:
  • Song Ma
  • Justin Murfin
  • Ryan D. Pratt

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. Conversely, incumbents accelerate capital replacement in the presence of more young firms. The evidence suggests previously undocumented benefits to co-location between old and young firms.

Suggested Citation

  • Song Ma & Justin Murfin & Ryan D. Pratt, 2021. "Young Firms, Old Capital," NBER Working Papers 29189, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29189
    Note: CF IO PR
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    File URL: http://www.nber.org/papers/w29189.pdf
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    Cited by:

    1. Manasa Gopal & Philipp Schnabl, 2022. "The Rise of Finance Companies and FinTech Lenders in Small Business Lending," The Review of Financial Studies, Society for Financial Studies, vol. 35(11), pages 4859-4901.
    2. Joye Khoo & Adrian (Wai Kong) Cheung, 2024. "Vintage capital and trade credit," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 64(1), pages 507-537, March.

    More about this item

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
    • R4 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics

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