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Globalization and Profitability of US Firms: The Role of Intangibles

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Listed:
  • Bullipe R. Chintha
  • Ravi Jagannathan
  • Sri S. Sridhar

Abstract

China's admission into the WTO in 2001 heralded a new era of globalization, increasing both import competition in domestic markets and foreign opportunities for US firms. In the aggregate, the average annual profitability of US public firms during the post globalization period (2003-2019) increased by 11.5% of the corresponding pre-globalization period (1984-2002) profitability. This increase in overall aggregate profitability was primarily driven by foreign profitability increasing by 47.4% for firms in the S&P 500 index, which are larger and have more intangible assets created by R&D and SG&A expenditures. In contrast, following globalization, the average aggregate domestic profitability of US firms remained flat, and firms employed more capital to generate sales. Firms with higher intangible assets benefited more from globalization.

Suggested Citation

  • Bullipe R. Chintha & Ravi Jagannathan & Sri S. Sridhar, 2024. "Globalization and Profitability of US Firms: The Role of Intangibles," NBER Working Papers 32202, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32202
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    More about this item

    JEL classification:

    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • F30 - International Economics - - International Finance - - - General
    • G0 - Financial Economics - - General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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