The determinants of firms’ fixed capital investment play an important role in growth and business cycle theories. They are crucial in designing optimal fiscal policy. Hence, study aimed at the identification of the major impediments to the optimal level of investment at firm level, has not only academic interest, but also provides practical implications for economic policy.
There is a widely held belief that fierce competition improves the efficiency of production, which is clearly an extrapolation of the well-established fact that competition has a positive influence on efficient resource allocation. The intuition, which leads to this conclusion is related to the existence of a positive rent in monopolized markets and the corresponding possibilities for slack by managers and employees.