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The Adoption of Non-Rival Inputs and Firm Scope

Author

Listed:
  • Xian Jiang
  • Hannah Rubinton

Abstract

Custom software is distinct from other types of capital in that it is non-rival—once a firm makes an investment in custom software, it can be used simultaneously across its many establishments. Using confidential U.S. Census data, we document that while firms with more establishments are more likely to invest in custom software, they spend less on it as a share of total capital expenditure. We explain these empirical patterns by developing a model that incorporates the non-rivalry of custom software. In the model, firms choose whether to adopt custom software, the intensity of their investment, and their scope, balancing the cost of managing multiple establishments with the increasing returns to scope from the nonrivalrous custom software investment. Using the calibrated model, we assess the extent to which the decline in the rental rate of custom software over the past 40 years can account for a number of macroeconomic trends, including increases in firm scope and concentration.

Suggested Citation

  • Xian Jiang & Hannah Rubinton, 2026. "The Adoption of Non-Rival Inputs and Firm Scope," Working Papers 26-28, Center for Economic Studies, U.S. Census Bureau.
    • Handle: RePEc:cen:wpaper:26-28
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    File URL: https://www2.census.gov/library/working-papers/2026/adrm/ces/CES-WP-26-28.pdf
    File Function: First version, 2026
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    More about this item

    Keywords

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    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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