COMPLEMENTARITY BETWEEN TANGIBLE AND INTANGIBLE CAPITAL: EVIDENCE FROM JAPANESE FIRM-LEVEL DATA

Kaoru Hosono, Daisuke Miyakawa, Miho Takizawa () and Kenta Yamanouchi ()
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Daisuke Miyakawa: #x2020;Hitotsubashi University Business School (HUB), National Center of Sciences, 2-1-2 Hitotsubashi, Chiyoda-ku, Tokyo 101-8439, Japan
Miho Takizawa: Faculty of Economics, Gakushuin University, 1-5-1 Mejiro, Toshima-ku, Tokyo 171-8588, Japan
Kenta Yamanouchi: #x2021;Department of Economics, Keio University, 2-15-45, Mita,Minato-ku, Tokyo, 108-8345, Japan

The Singapore Economic Review (SER), 2020, vol. 65, issue 05, 1293-1321

Abstract: Using Japanese firm-level panel data spanning from 2000 to 2013, we estimate industry-level production functions that explicitly take into account the complementarity and substitutability between tangible and intangible capital. The estimation results show that tangible and intangible capitals are complementary in most industries although the degree of complementarity substantially varies across industries. We further find that the relation between tangible and intangible capital in the production function accounts for the relation between firm-level tangible capital and intangible capital investments. Namely, firms’ tangible investments are more strongly positively associated with intangible investments as the degree of the complementarity between the tangible and intangible assets becomes larger. These findings show the necessity to take into account the relation between the dynamics of tangible and intangible capital in terms of their complementarity for precisely understanding the mechanisms governing a firm’s growth.

Keywords: Intangible capital; production function; complementarity and substitutability; investment (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1142/S0217590819500735

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