Does Intangible Capital Show Up in Productivity?

Heli Koski, Otto Kässi and Jaakko Markkanen

No 152, ETLA Working Papers from The Research Institute of the Finnish Economy

Abstract: Abstract We use firm-level data from five European countries to examine what a accounting-based measure of intangible capital reveals about its relationship with productivity. Outside France, most firms have zero intangible capital under this measure, and differences across countries may partly reflect accounting practices which dictate when intangibles can be capitalized. We find a modest positive association between intangible capital and productivity across firms, but the association largely disappears when we examine changes within firms over time, except in France. The observed association therefore does not, on its own, show how investing more in intangible capital would affect productivity. Zero stock of intangible capital does not necessarily mean that firms do not invest in intangibles. Firms undertake a substantial share of intangible investment in-house, for example in R&D and in developing software, brands and data. These costs are typically expensed, so intangible assets on balance sheets give only a partial picture of firms’ intangible capital. To support decisions and comparisons concerning intangible investment, financial statement-based measures should be complemented by measures that also capture intangible capital produced in-house. Such measures have already been constructed using administrative register data.

Keywords: Intangible capital; Financial statements; Measurement; Productivity; Firm-level data (search for similar items in EconPapers)
JEL-codes: D24 E22 M41 O34 (search for similar items in EconPapers)
Pages: 10 pages
Date: 2026-10-29
New Economics Papers: this item is included in nep-acc, nep-eec and nep-sbm
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