Keywords

entrepreneurship, capital reallocation, investment

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 disproportion- ate 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, in- cumbents accelerate capital replacement in the presence of younger firms. The evidence suggests previously undocumented benefits to co-location between old and young firms.

Original Publication Citation

Young Firms, Old Capital, with Song Ma and Justin Murfin Journal of Financial Economics, 2022, 146(1): 331-356.

Document Type

Peer-Reviewed Article

Publication Date

2022

Publisher

Journal of Financial Economics

Language

English

College

Marriott School of Business

Department

Finance

University Standing at Time of Publication

Associate Professor

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