Intangible Investment and Firm Performance

It is hard to see    
where intangibles take you.     
Happy customers?     

Unsplash JumpWe 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.

This topic in other formats

Presentation

Intangible investment and firm performance (2016)

Funders

Productivity Hub