EBSLG

 

 
European Business Schools Librarian's Group
Home About Series Subject/JEL codes Advanced Search
HEC Paris. Research Department Les Cahiers de Recherche - HEC Paris
 

No 1046:
How Does Corporate Investment Respond to Increased Entry Threat?

Philip Valta () and Laurent Frésard ()

Abstract: The authors use large reductions of import tariffs to examine how incumbent firms modify investment when the threat of entry by foreign rivals intensifies. Incumbents reduce investment by 7.2% of capital in response to higher entry threat. This effect is robust, pervasive, and likely causal. Consistent with predictions of strategic investment models, the investment reduction concentrates in markets where competitive actions are strategic substitutes, where deterring entry is costly, and where investment makes incumbents look soft. Moreover, firms only reduce tangible investment which comprises commitment value, but do not reduce intangible investment. The authors' results provide novel evidence on how and why market structures and strategic interactions influence corporate investment.

Keywords: Corporate investment; Entry Threat; Tariff Reduction; Strategic Interactions; (follow links to similar papers)

JEL-Codes: G15; G31; G34; (follow links to similar papers)

52 pages, December 17, 2014

Before downloading any of the electronic versions below you should read our statement on copyright.
Download GhostScript for viewing Postscript files and the Acrobat Reader for viewing and printing pdf files.

Full text versions of the paper:

papers.cfm?abstract_id=2023029    PDF-file
Download Statistics

Questions (including download problems) about the papers in this series should be directed to Sandra Dupouy ()
Report other problems with accessing this service to Sune Karlsson () or Helena Lundin ().

Programing by
Design Joakim Ekebom

Handle: RePEc:ebg:heccah:1046 This page was generated on 2015-01-30 12:42:55