Soft Information and Investment: Evidence from Plant-Level Data

Xavier Giroud

Working Papers from U.S. Census Bureau, Center for Economic Studies

Abstract: A reduction in travel time between headquarters and plants makes it easier for headquarters to monitor plants and gather �soft� information--i.e., information that cannot be transmitted through non-personal means. Using a difference-in-differences methodology, I find that the introduction of new airline routes that reduce the travel time between headquarters and plants leads to an increase in plant-level investment of 8% to 9% and an increase in plants� total factor productivity of 1.3% to 1.4%. Consistent with the notion that a reduction in travel time makes it easier for headquarters to monitor plants and gather soft information, I find that my results are stronger: i) for plants whose headquarters are more time constrained; ii) for plants operating in soft-information industries; iii) during the earlier years of my sample period, when alternative, non-personal, means of monitoring and transmitting information were less developed; iv) for plants where information uncertainty is likely to be greater and soft information is likely to be more valuable, such as smaller plants and peripheral plants operating in industries that are not the firm�s main industry.

Pages: 58 pages
Date: 2010-10, Revised 2010-11
New Economics Papers: this item is included in nep-bec
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Citations: View citations in EconPapers (1)

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https://www2.census.gov/ces/wp/2010/CES-WP-10-38R.pdf Revised version, 2010 (application/pdf)
https://www2.census.gov/ces/wp/2010/CES-WP-10-38.pdf First version, 2010 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:10-38

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