Young Firms, Old Capital
74 Pages Posted: 26 Aug 2020 Last revised: 26 Aug 2021
Date Written: July 29, 2020
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.
Keywords: Entrepreneurship, Capital Reallocation, Investment
JEL Classification: L26, E22, G31
Suggested Citation: Suggested Citation