I study whether firms' reliance on intangible assets is an important determinant of financing constraints. I construct new measures of firm-level physical and intangible assets using accounting information on U.S. public firms. I find that firms with a higher share of intangible assets in total assets start smaller, grow faster, and have higher Tobin’s q. Asset tangibility predicts firm dynamics and Tobin’s q up to 30 years but has diminishing predicative power. I develop a model of endogenous financial constraints in which firm size and value are limited by the enforceability of financial contracts. Asset tangibility matters because physical and intangible assets differ in their residual value when the contract is repudiated. This mechanism is qualitatively important to explain stylized facts of firm dynamics and Tobin’s q.
Since the beginning of the 1990s, foreign direct investment (FDI) in developing countries has increased dramatically. The distribution of FDI flows across these countries, however, is highly uneven; only a small number attract comparatively large amounts of foreign capital. This paper investigates whether the pattern of FDI flows can be explained by the standard neoclassical model or by modified versions of this model that allow for differences in production technologies across countries. The results suggest that the standard neoclassical approach is not particularly useful if we want to understand FDI flows to developing countries.