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Young firms under pressure: Heterogeneous investment responses to a trade shock

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  • Dibiasi, Andreas
  • Erhardt, Katharina

Abstract

This paper studies heterogeneous firm responses to a sudden trade-induced profitability shock - the 2015 Swiss franc appreciation. Using firm-level investment data and a novel measure of exposure, we document that this trade shock causes large and persistent investment declines among affected firms. Examining heterogeneous responses among firms with similar exposure, we find that differences in responsiveness are not explained by economic fundamentals but are strongly linked to firm age and managerial experience. Younger firms and those led by less experienced managers react substantially more strongly. We argue that these empirical patterns are consistent with a model of Bayesian learning, in which firms update their beliefs about profitability over time. The results provide important insights into the long-lasting effects of trade shocks on business dynamism, capital investment, and local employment.

Suggested Citation

  • Dibiasi, Andreas & Erhardt, Katharina, 2025. "Young firms under pressure: Heterogeneous investment responses to a trade shock," DICE Discussion Papers 426, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    • Handle: RePEc:zbw:dicedp:324872
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    References listed on IDEAS

    as
    1. Andreas Dibiasi & Heiner Mikosch & Samad Sarferaz, 2025. "Uncertainty Shocks, Adjustment Costs, and Firm Beliefs: Evidence from a Representative Survey," American Economic Journal: Macroeconomics, American Economic Association, vol. 17(3), pages 36-73, July.
    2. Nicholas Bloom & John Van Reenen, 2007. "Measuring and Explaining Management Practices Across Firms and Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(4), pages 1351-1408.
    3. Marianne Bertrand & Antoinette Schoar, 2003. "Managing with Style: The Effect of Managers on Firm Policies," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(4), pages 1169-1208.
    4. Greer K. Gosnell & John A. List & Robert D. Metcalfe, 2020. "The Impact of Management Practices on Employee Productivity: A Field Experiment with Airline Captains," Journal of Political Economy, University of Chicago Press, vol. 128(4), pages 1195-1233.
    5. Ouimet, Paige & Zarutskie, Rebecca, 2014. "Who works for startups? The relation between firm age, employee age, and growth," Journal of Financial Economics, Elsevier, vol. 112(3), pages 386-407.
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    Cited by:

    1. KUMANOMIDO, Hiroshi, 2026. "Exchange Rate Appreciation and Structural Adjustment : Evidence from the Plaza Accord," TDB-CAREE Discussion Paper Series E-2025-04, Teikoku Databank Center for Advanced Empirical Research on Enterprise and Economy, Graduate School of Economics, Hitotsubashi University.

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    Keywords

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    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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