Summary of Understanding Weak Capital Investment

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Understanding Weak Capital Investment summary
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Rating

8

Qualities

  • Analytical
  • Eye Opening
  • For Experts

Recommendation

Economists and business analysts have noted a downward trend in the size, scale and scope of companies’ investments in property, plant and equipment since 2000. Professors Nicolas Crouzet and Janice Eberly examine this anemic capital deployment in the context of higher spending on “intangible capital.” They find that this fundamental shift in many industries confers market advantages that physical capital cannot replicate. getAbstract recommends this insightful report to executives and analysts for its sharp dissection of trends in corporate investment.

In this summary, you will learn

  • How physical capital differs from “intangible capital,”
  • Why corporate spending on the two types of assets is diverging, and
  • What these investments signify for businesses and the economy.
 

About the Authors

Nicolas Crouzet is an associate professor of finance and Janice Eberly is a professor of finance at the Kellogg School of Management at Northwestern University. 

 

Summary

Businesses strategically invest in physical capital – comprised of property, plant and equipment (PPE) – and in “intangible capital,” consisting of “software, intellectual property, brand and innovative business processes.” Since 2000, and particularly after the Great Recession, companies in the technology, retail, manufacturing and production sectors have poured far less physical capital into projects, despite operating in a low interest rate environment. While generating strong profit growth, firm leaders have generally eschewed higher levels of physical capital...


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