Job Market Paper

Long-Run Competitive Spillovers of the Credit Crunch

Competition in the U.S. appears to have declined. One contributing factor may have been heterogeneity in the availability of credit during the financial crisis. I examine the impact of product market peer credit constraints on long-run competitive outcomes and behavior among non-financial firms. I use measures of lender exposure to the financial crisis to create a plausibly exogenous instrument for product market credit availability. I nd that credit constraints of product market peers positively predict growth in sales, market share, profitability, and markups. This is consistent with the notion that firms gained at the expense of their credit-constrained peers. The relationship is robust to accounting for other sources of inter-rm spillovers, namely credit access of technology network and supply chain peers. Further, I nd evidence of strategic investment, i.e. the idea that firms increase investment in response to peer credit constraints to commit to deter entry mobility. This behavior may explain why temporary heterogeneity in the availability of credit appears to have resulted in a persistent redistribution of output across firms.

Works in Progress

• Firm Dynamism, Productivity and the German Anomaly (with R. Gropp and V. Slavtchev)

Bravo-Biosca shows that the share of strongly growing and strongly declining firms tends to be lower in Europe than in the US. He shows that this lack of firm dynamism may at least in part explain the lower productivity growth in Europe compared to the US, especially in the face of disruptive innovation. In this paper, we update and expand upon Bravo-Biosca’s main results for major European countries. We generally observe similar regularities in firm growth dynamics as Bravo-Biosca. However, using our whole sample, we struggle to find a significant relation-ship between firm dynamism and productivity growth. We show that Germany has an exceptionally high number of firms that neither grew nor declined. The share of static firms in Germany is nearly twice the national average in our sample. This pattern persists across sectors and firm size within Germany. Germany also has a low rate of firm exit and birth relative to other countries in the sample. Removing Germany from the analysis, we find a relationship be-tween productivity and firm dynamism consistent with that of Bravo-Biosca. We speculate that the results suggest that there is something unique about the way innovation is transmitted throughout the German economy.

• Some Stylized Facts on Acquisition Spending

• The Knowledge Spillovers of IPOs