A new approach to the valuation of intangible capital

Jason Cummins ()

No 2004-17, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Intangible capital is not a distinct factor of production as is physical capital or labor. Rather it is the \"glue\" that creates value from other factor inputs. This perspective naturally suggests an empirical model in which intangible capital is defined in terms of adjustment costs. My estimates of these adjustment costs from firm-level panel data suggest that no appreciable intangibles are associated with R&D and advertising, whereas information technology creates intangibles with a 72% annual rate of return--a sizable figure that is nevertheless much smaller than that reported in previous studies. To build a bridge to previous research, I show that much larger estimates can be obtained with ordinary least squares, a method that ignores the possibility that the value of the firm and its investment policy are simultaneously determined.

Keywords: Intangible property; Capital (search for similar items in EconPapers)
Date: 2004
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.federalreserve.gov/pubs/feds/2004/200417/200417abs.html (text/html)
http://www.federalreserve.gov/pubs/feds/2004/200417/200417pap.pdf (application/pdf)

Related works:
Chapter: A New Approach to the Valuation of Intangible Capital (2005)
Working Paper: A New Approach to the Valuation of Intangible Capital (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2004-17

Access Statistics for this paper

More papers in Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ; Keisha Fournillier ().