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Intangible Investment and Firm Performance

Author

Listed:
  • Nathan Chappell

    () (Motu Economic and Public Policy Research)

  • Adam Jaffe

    () (Motu Economic and Public Policy Research)

Abstract

We combine survey and administrative data for about 13,000 firms from 2005 to 2013 to study the inter-relationships among firm characteristics, intangible investment and firm performance. We find that firm size is associated with higher intangible investment, while firm age, very low competition (‘captive market’) and very high competition (‘many competitors, none dominant’) are associated with lower intangible investment. Relating intangible investment to subsequent firm performance, we find that higher investment is associated with higher labour and capital input and higher revenue, relative to what would otherwise have been predicted. We also find that higher investment is associated with higher firm-reported employee and customer satisfaction, but is not associated with higher productivity or profitability. While we cannot estimate a causal model, the evidence suggests that intangible investment is associated with firm strategies related to growth and possibly to ‘soft’ performance objectives, but not to productivity or profitability.

Suggested Citation

  • Nathan Chappell & Adam Jaffe, 2016. "Intangible Investment and Firm Performance," Working Papers 16_14, Motu Economic and Public Policy Research.
    • Handle: RePEc:mtu:wpaper:16_14
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    References listed on IDEAS

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    Cited by:

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    2. Qing Li & Long Hai Vo, 2021. "Intangible Capital and Innovation: An Empirical Analysis of Vietnamese Enterprises," Economics Discussion / Working Papers 21-02, The University of Western Australia, Department of Economics.
    3. Ryota Nakatani, 2019. "Firm performance and corporate finance in New Zealand," Applied Economics Letters, Taylor & Francis Journals, vol. 26(13), pages 1118-1124, July.
    4. Marie Le Mouel & Alexander Schiersch, 2020. "Knowledge-Based Capital and Productivity Divergence," Discussion Papers of DIW Berlin 1868, DIW Berlin, German Institute for Economic Research.
    5. Mike Onder Kaymaz & Ilker Yilmaz & Ozgur Kaymaz, 2019. "The Impact Of Intangible Factors On Profitability: Evidence From Corporations Traded At Muscat Securities Market In Oman," Copernican Journal of Finance & Accounting, Uniwersytet Mikolaja Kopernika, vol. 8(2), pages 25-47.
    6. Hyuk Chung, 2021. "Adoption and Development of the Fourth Industrial Revolution Technology: Features and Determinants," Sustainability, MDPI, Open Access Journal, vol. 13(2), pages 1-16, January.
    7. Richard Fabling, 2021. "Living on the edge: An anatomy of New Zealand’s most productive firms," Working Papers 21_01, Motu Economic and Public Policy Research.
    8. Roth, Felix, 2019. "Intangible Capital and Labour Productivity Growth: A Review of the Literature," Hamburg Discussion Papers in International Economics 4, University of Hamburg, Chair of International Economics.
    9. Shenglang Yang & Yixiao Zhou & Ligang Song, 2018. "Determinants of Intangible Investment and Its Impacts on Firms' Productivity: Evidence from Chinese Private Manufacturing Firms," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 26(6), pages 1-26, November.

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    More about this item

    Keywords

    Intangible investment; productivity; firm performance; industrial policy;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm

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