Unlocking investment in intangible assets in Europe

Intangible assets are at the heart of what makes firms competitive. They are vital for productivity and economic growth. A key question is whether the factors that tend to hold back investments in Europe are the same for tangible and intangible assets. Is there is a need for specific policy measures addressing intangible assets? This section reflects on the specifics of intangibles, groups relevant characteristics and relates investments in intangibles to a series of potential drivers and barriers. To unlock investment in intangible assets, regulation enabling a flexible re-allocation of resources, in particular through well-functioning product, labour and capital markets, is pivotal. At the same time, there is a need for an appropriate mix of modern and effective intellectual property rights systems to ensure sufficient returns on investment and a competition policy addressing monopoly power and rent-seeking (together with effective enforcement). Access to finance for intangibles could be improved by amending financing schemes and enhancing the systematic reporting of investments, e.g. with new accounting and corporate disclosure standards. In the event of market failure, public intervention can play an important role by providing direct or indirect support, in particular for assets with high social returns (such as investment in R&D or in training), or ensuring sufficient investment in relevant physical infrastructure. The rise in the importance of intangible assets also means that it is important to get human capital policies right. Finally, we need to broaden our concept of knowledge creation ñ both in the context of national accounts and at the level of individual firms ñ to take in R&D, but also other forms of intangible capital, such as economic competence, training or design. In turn, we will need better means of measuring intangible capital. Corresponding policy initiatives are essential for Europe, in particular with a view to closing the investment gap in terms of intangible assets vis-‡-vis the United States, and thus stimulating total factor productivity and long-term growth.