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Profit Rates and Intangible Capital

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Author Info
Megna, Pamela
Mueller, Dennis C

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Abstract

A central question in industrial organization is why profit rates differ so dramatically across firms and industries. One of the many explanations offered for this phenomenon is the failure of conventional accounting methods to adjust for intangible capital stocks, i.e., it is argued that profit rates do not differ dramatically when capital stocks are correctly calculated to include intangible R&D and advertising capital. To test this hypothesis individual advertising capital stocks are calculated for firms in the toys, distilled beverages, cosmetics, and pharmaceuticals industries, and R&D stocks are calculated for the pharmaceuticals firms. The adjustments do not eliminate the wide dispersion in profit rates. Copyright 1991 by MIT Press.

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Publisher Info
Article provided by MIT Press in its journal Review of Economics & Statistics.

Volume (Year): 73 (1991)
Issue (Month): 4 (November)
Pages: 632-42
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Handle: RePEc:tpr:restat:v:73:y:1991:i:4:p:632-42

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  1. Petr Hanel & Alain St-Pierre, 2002. "Effects of R & D Spillovers on the Profitability of Firms," Review of Industrial Organization, Springer, vol. 20(4), pages 305-322, June. [Downloadable!] (restricted)
  2. Gleason, Katherine I. & Klock, Mark S., 2003. "Intangible capital in the pharmaceutical & chemical industry," Working Papers 2003-04, University of New Orleans, Department of Economics and Finance. [Downloadable!]
  3. Marta Ballester & Manuel Garcia-Ayuso & Joshua Livnat, 2003. "The economic value of the R&D intangible asset," European Accounting Review, Taylor and Francis Journals, vol. 12(4), pages 605-633, January. [Downloadable!] (restricted)
  4. Jakob B Madsen & E Philip Davis, 2003. "Equity Prices, Productivity Growth, And ‘The New Economy’," Economics and Finance Discussion Papers 03-04, Economics and Finance Section, School of Social Sciences, Brunel University. [Downloadable!]
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  5. Chen-Lung Chin & Picheng Lee & Hsin-Yi Chi & Asokan Anandarajan, 2006. "Patent Citation, R&D Spillover, and Tobin's Q: Evidence from Taiwan Semiconductor Industry," Review of Quantitative Finance and Accounting, Springer, vol. 26(1), pages 67-84, February. [Downloadable!] (restricted)
  6. Jaideep Anand, 2004. "Redeployment of corporate resources: A study of acquisition strategies in the US defense industries, 1978-1996," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 25(6-7), pages 383-400. [Downloadable!]
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