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Liquidity as competitive advantage: The role of intangibles

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  • Altomonte, Carlo
  • Morlacco, Monica
  • Sonno, Tommaso
  • Favoino, Domenico

Abstract

We show that short-term liquidity can be a source of competitive advantage by enabling firms to invest in intangible assets. Our analysis leverages a French reform that capped payment delays in trade credit contracts, which generated quasi-experimental variation in corporate liquidity across manufacturing firms. Higher liquidity led to significantly greater investment in intangibles, which, in turn, raised markups and market shares. These results suggest a strategic role for liquidity in shaping firm performance, indicating that initial financial conditions can have lasting effects on productivity and market structure.

Suggested Citation

  • Altomonte, Carlo & Morlacco, Monica & Sonno, Tommaso & Favoino, Domenico, 2025. "Liquidity as competitive advantage: The role of intangibles," Journal of International Economics, Elsevier, vol. 158(C).
    • Handle: RePEc:eee:inecon:v:158:y:2025:i:c:s0022199625001254
    DOI: 10.1016/j.jinteco.2025.104168
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