Globalization and Profitability of Us Firms: The Role of Intangibles

86 Pages Posted: 5 Mar 2024

See all articles by Bullipe Chintha

Bullipe Chintha

Indian School of Business

Ravi Jagannathan

Northwestern University - Kellogg School of Management; National Bureau of Economic Research (NBER); Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF); Indian School of Business (ISB), Hyderabad

Swaminathan Sridharan

Northwestern University - Kellogg School of Management

Date Written: March 2024

Abstract

China's admission into the WTO in 2001 heralded a new era of globalization, increasing both import competition in domestic markets and foreign opportunities for US firms. In the aggregate, the average annual profitability of US public firms during the post globalization period (2003-2019) increased by 11.5% of the corresponding pre-globalization period (1984-2002) profitability. This increase in overall aggregate profitability was primarily driven by foreign profitability increasing by 47.4% for firms in the S&P 500 index, which are larger and have more intangible assets created by R&D and SG&A expenditures. In contrast, following globalization, the average aggregate domestic profitability of US firms remained flat, and firms employed more capital to generate sales. Firms with higher intangible assets benefited more from globalization.

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Suggested Citation

Chintha, Bullipe R. and Jagannathan, Ravi and Sridharan, Swaminathan, Globalization and Profitability of Us Firms: The Role of Intangibles (March 2024). NBER Working Paper No. w32202, Available at SSRN: https://ssrn.com/abstract=4746812

Bullipe R. Chintha (Contact Author)

Indian School of Business ( email )

Gachibowli
Hyderabad, 500032
India

Ravi Jagannathan

Northwestern University - Kellogg School of Management ( email )

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National Bureau of Economic Research (NBER)

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Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF) ( email )

Shanghai Jiao Tong University
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China

Indian School of Business (ISB), Hyderabad ( email )

Hyderabad, Gachibowli 500 019
India

Swaminathan Sridharan

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States
847-491-8807 (Phone)
847-467-1202 (Fax)

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