We show that short-term liquidity can be a source of competitive advantage by enabling firms to invest in intangible assets. Our analysis leverages a French reform that capped payment delays in trade credit contracts, which generated quasi-experimental variation in corporate liquidity across manufacturing firms. Higher liquidity led to significantly greater investment in intangibles, which, in turn, raised markups and market shares. These results suggest a strategic role for liquidity in shaping firm performance, indicating that initial financial conditions can have lasting effects on productivity and market structure.

---

1 December 2025

---

Journal of International Economics 1582025

---

DOI: 10.1016/j.jinteco.2025.104168

https://www.sciencedirect.com/science/article/pii/S0022199625001254

This Journal article is published under the centre's Trade programme.