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The generation and exploitation of technological change: market value and total factor productivity

  • Cristiano Antonelli

    ()

  • Alessandra Colombelli

    ()

In this paper we articulate and test the hypothesis that TFP is a reliable and relevant measure of firm’s innovation capabilities, and, as such, accounts for Tobin’s q indicator. With this aim, we investigate empirically the relationship between firm level total factor productivity and the Tobin’s q. Measuring Tobin’s q allows inferring the actual value of knowledge capital from stock market valuation. We use a panel of companies listed on UK and the main continental Europe financial markets (Germany, France and Italy) for the period 1995 - 2005. Our results confirm that TFP is a reliable indicator of firm’s innovative capabilities. When we control for firm’s R&D investments, the effects of TFP on market value remain highly significant. This suggests that TFP is a broader measure of innovation capability than R&D is. The validation of the Tobin’s q and TFP relationship has important implications concerning firm’s technological innovation measurement.

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File URL: http://hdl.handle.net/10.1007/s10961-010-9198-z
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Article provided by Springer in its journal The Journal of Technology Transfer.

Volume (Year): 36 (2011)
Issue (Month): 4 (August)
Pages: 353-382

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Handle: RePEc:kap:jtecht:v:36:y:2011:i:4:p:353-382
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