Expansionary Investment Activities: Assessing Equipment and Buildings in Productivity

Jasper Brinkerink, Andrea Chegut, Wilko Letterie

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Abstract

We study firm-level expansionary investment activities in both equipment and buildings—the so-called investment spikes. Our identification strategy decomposes firm investment spikes into three streams: a spike in equipment only, buildings only, or a simultaneous spike. Empirically, we find that the timing and size of investment in equipment and buildings are not independent. Firms conducting a simultaneous spike enhance firm scale more than in the case of a spike in equipment or buildings alone. Employment growth occurs when a firm builds structures. Investment in equipment affects the optimal input mix and high productivity in equipment and buildings provides investment timing signals. In low-tech sectors firm production growth depends on investment in buildings. In contrast, a necessary condition for firms in high-tech sectors to grow their production is investment in equipment.keywordsinvestment spikesequipmentbuildingsinterrelationscaleproductivityinput mixefficiencylow- and high-techlabour intensity.
Original languageEnglish
Title of host publicationAdvances in Efficiency and Productivity Analysis
EditorsChristopher Parmeter, Robin Sickles
Place of PublicationSwitzerland
PublisherSpringer International Publishing
Pages303-333
VolumeNAPW 2018
ISBN (Electronic)978-3-030-47106-4
ISBN (Print)978-3-030-47106-4
DOIs
Publication statusPublished - 2020

Keywords

  • investment spikes
  • equipment
  • buildings
  • interrelation
  • scale
  • productivity
  • input mix
  • efficiency
  • low- and high-tech
  • labour intensity

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