Paying for the New Economy

The Geography of Equity Finance in North Carolina

Abstract

The availability of corporate finance is of critical importance to local and regional development. As firms increasingly substitute intangible assets (such as human capital, innovative capacity and brand equity) for tangible assets (factories, machinery and inventories), they are less able to collateralize the traditional source of capital, debt financing. Since equity finance (the offering of ownership shares through public stock markets) is the only method of capital acquisition that is not collateralized, the firms that compete most effectively for it are thought to be stronger competitors in the current marketplace. It was found that equity investment in North Carolina is highly concentrated both spatially (40% in Charlotte) and sectorally (56% in FIRE). Relatively small shares of equity are held by firms in the manufacturing (10% of the state total) and technology industries (9% of the state total). While the total amount of equity investment in North Carolina firms has increased, its increased concentration suggests a lack of diversity in the state's economy.