NATIONAL GOVERNANCE QUALITY, COMPETITION AND FIRM INVESTMENT
DOI:
https://doi.org/10.2478/eoik-2025-0021Keywords:
competition; firm investment; national governance quality; research and development; tangible assetsAbstract
This study investigates how market competition affects firm in-
vestment and the moderating effect of national governance quality
(CGI) on the relationship between competition and firm investment
in research and development (R&D) and tangible assets. The sam-
ple consists of 16,493 observations from World Bank Enterprise Sur-
veys (WBES) in 88 countries in 2016 – 2022. The regression results
show that both the competition and the level of market competition
encourage firms to invest more in R&D and tangible assets. The
quality of national governance also adjusts the relationship between
competition and firm investment. Notably, the better quality of na-
tional governance strengthens the relationship between competition
and firm investment. However, it weakens the relationship between
a higher degree of competition and firm investment. In addition, the
marginal effects examination suggests that variations in the quality
of national governance influence the relationship between competi-
tion and investment in R&D investment, which is more pronounced
than tangible investment in the presence of at least one competitor. In
conclusion, the relationship between competition and investment is
moderated by changes in CGI, the starting level of CGI score, and the
market structures. The empirical results propose some implications
for firm managers and policymakers to boost investment and a trans-
parent environment for firm investment.
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