Young Firms, Old Capital

75 Pages Posted: 30 Aug 2021 Last revised: 4 Apr 2025

See all articles by Song Ma

Song Ma

Yale School of Management; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Justin Murfin

Cornell SC Johnson College of Business

Ryan Pratt

Brigham Young University

Multiple version iconThere are 2 versions of this paper

Date Written: August 2021

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 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.

Suggested Citation

Ma, Song and Murfin, Justin and Pratt, Ryan, Young Firms, Old Capital (August 2021). NBER Working Paper No. w29189, Available at SSRN: https://ssrn.com/abstract=3913832

Song Ma (Contact Author)

Yale School of Management ( email )

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HOME PAGE: http://faculty.som.yale.edu/songma/

National Bureau of Economic Research (NBER) ( email )

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European Corporate Governance Institute (ECGI)

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Justin Murfin

Cornell SC Johnson College of Business ( email )

Ithaca, NY 14850
United States

Ryan Pratt

Brigham Young University ( email )

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

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