Working Paper: NBER ID: w20350
Authors: Casey Dougal; Christopher A. Parsons; Sheridan Titman
Abstract: We find that a firm's investment is highly sensitive to the investments of other firms headquartered nearby, even those in very different industries. It also responds to fluctuations in the cash flows and stock prices (q) of local firms outside its sector. These patterns do not appear to reflect exogenous area shocks such as local shocks to labor or real estate values, but rather suggest that local agglomeration economies are important determinants of firm investment and growth.
Keywords: urban vibrancy; corporate growth; investment sensitivity; local agglomeration economies
JEL Codes: G3; G31; R10; R12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| local agglomeration economies (R11) | firm investment (G32) |
| local agglomeration economies (R11) | firm growth (L26) |
| investment behavior of nearby firms (D22) | firm's investment (G31) |
| local cash flows and stock prices of nearby firms (G19) | firm's investment decisions (G11) |
| firm's investment (G31) | local economic conditions (R11) |