NC State Ag Economist Dr. Mike Walden – “Are Businesses Short-Sighted?”


Mary:  I’m Mary Walden, with economist MW, welcoming you to the economic perspective.   Today’s program asks if businesses are short-sighted.  Mike, there has been a long-running complaint – indeed, going back decades – that many businesses focus only on short-term profits rather than long-run performance.   The concern is that businesses motivated only by near-term gains won’t make the investments and changes for long-term success.   Does this concern have any validity?


Mike:  Summary Answer

  1. Based on just released study, answer is yes
  2. Study used various measures to separate firms focused on short term gains versus those looking at long term gains
  3. Study found short sighted firms invested less – an average of 50% less in research and development
  4. Also found that long-sighted firms performed better over the long run, had higher profits, and less volatility in their revenues
  5. Interestingly, study found proportion of firms focusing short-term rises during good times and falls during bad economic times
  6. Rely on shareholders and investors to monitor
  7. Also make sure tax law do
  8. I’m MW


Mary:  And I’m Mary Walden for the North Carolina Cooperative Extension Service