What are some restrictions to the competitive restoration of proportionality across industries in regards to capital mobility? What is generally impeding the free flow of capital from less profitable sectors into those with higher profitable potentiality and from eroding larger firms market share? Also does the integration of finance capital and industrial capital play any role in this? Lastly, why isn't new capital entering these markets and averaging out profit rates?
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This is a massive area of research, revived recently under the title of "capital misallocation".
Some reason why capital do not fully adjust:
grow in intangible capital-intensive sectors (which require more internal financing than other sectors) + low interest rates.
quadratic adjustment costs on investment.
financial frictions lowers access to credit to small yet highly productive firms.
industry-specific physical and human capital.
The are many more papers studying financial frictions and related aspects of the financial market, showing that the role of finance is very important.
answered Aug 16, 2017 at 8:05