This paper considers a two sectors heterogeneous rms model where rms' specific technology and capital intensity are endogenously determined through business dynamics. We show that a shock to the relative price of investment goods
is followed by the entrance of new firms characterized by higher capital intensity of production and lower labor income share. Remarkably, differently from Karabarbounis and Nieman (2014) and Piketty (2014), a standard Cobb-Douglas
production function, where capital and labor are complements, is sufficient to obtain the result. Using ORBIS microdata of US, UK, Germany and France we find strong and robust evidence conrming that new firms enter the market with higher
capital intensity and lower labor income share than the average. Remarkably, this evidence holds for those firms entering the market from 1980 to 2007, a period characterized by a strong decline of the relative price of investment goods