Determinants and impacts of intangible investment: Evidence from Chinese private manufacturing firms
Determinants of investment in intangibles by firms and the effects of intangible investment on firm productivity have been documented for developed economies. Evidence on these issues in emerging economies, however, is scarce. Using data from China Enterprise Survey 2012 conducted by the World Bank, this study examines the determinants and impacts of intangible investment by private manufacturing firms in China, thus shedding light on recent development of intangibles in one of the largest emerging economies in the world. It is found that more human capital, larger firm size and better institutional quality generally increase the propensity and the amount of intangible investment, and yet fiercer market competition decreases both the propensity and the amount to invest in intangibles. We also provide evidence that the three components of intangibles including research and development (R&D) investment, software investment and organization investment as well as ICT investment are positively correlated with firm productivity. Furthermore there is complementarity between software investment and organization investment. Implications for policies to enhance investment in intangibles are identified from the empirical results.
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