Young Firms, Old Capital

74 Pages Posted: 26 Aug 2020 Last revised: 26 Aug 2021

See all articles by Song Ma

Song Ma

Yale School of Management; National Bureau of Economic Research (NBER)

Justin Murfin

Cornell SC Johnson College of Business

Ryan Pratt

Brigham Young University

Multiple version iconThere are 2 versions of this paper

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

Ma, Song and Murfin, Justin and Pratt, Ryan, Young Firms, Old Capital (July 29, 2020). Journal of Financial Economics (JFE), Forthcoming, Available at SSRN: or

Song Ma

Yale School of Management ( email )

165 Whitney Ave
P.O. Box 208200
New Haven, CT 06511
United States


National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Justin Murfin

Cornell SC Johnson College of Business ( email )

Ithaca, NY 14850
United States

Ryan Pratt (Contact Author)

Brigham Young University ( email )

640 TNRB
Provo, UT 84602
United States
(801) 422-1222 (Phone)

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