The role of intangible assets in explaining the investment-profit puzzle

dc.contributor.authorOrhangazi, Özgür
dc.date.accessioned2020-06-29T12:35:49Z
dc.date.available2020-06-29T12:35:49Z
dc.date.issued2019
dc.departmentFakülteler, İktisadi, İdari ve Sosyal Bilimler Fakültesi, Ekonomi Bölümüen_US
dc.description.abstractStarting around the early 2000s, and especially after the 2008 crisis, the rate of capital accumulation for US nonfinancial corporations has slowed down despite relatively high profitability; indicating a weakening of the link between profitability and investment. While the literature mostly focuses on financialisation and globalisation as the reasons behind this slowdown, I suggest adding another layer to these explanations and argue that, in conjunction with financialisation and globalisation, we need to pay attention to the increased use of intangible assets by nonfinancial corporations in the last two decades. Intangibles such as brand names, trademarks, patents and copyrights play a role in the widening of the profit-investment gap as the use of these assets enables firms to increase market power and profitability without necessarily generating a corresponding increase in fixed capital investment. After discussing the ways nonfinancial corporations use intangible assets, I look at large corporations in the USA and find the following: (i) The ratio of intangible assets to the capital stock increased in general. This increase is highest for firms in high-technology, healthcare, nondurables and telecommunications. (ii) Industries with higher intangible asset ratios have lower investment to profit ratios. (iii) Industries with higher intangible asset ratios have higher markups and profitability. (iv) The composition of the nonfinancial corporate sector has changed and the weight of high-technology and healthcare firms has increased; but this increase did not correspond to an equal increase in their investment share. The decline in the investment share of durables, nondurables and machinery is matched by an increase in the investment share of location-specific industries with low intangible asset use, most notably firms in energy extraction. In general, these firms have steadier markups and higher investment to profit ratios. (v)Yet, intangible-intensive industries' profitability has increased faster than their share of investment or total assets. All in all, these findings are in line with the suggestion that the increased use of intangible assets enables firms to have high profitability without a corresponding increase in investment.en_US
dc.identifier.citation57
dc.identifier.doi10.1093/cje/bey046en_US
dc.identifier.endpage1285en_US
dc.identifier.issn0309-166Xen_US
dc.identifier.issn1464-3545en_US
dc.identifier.issn0309-166X
dc.identifier.issn1464-3545
dc.identifier.issue5en_US
dc.identifier.scopus2-s2.0-85072638967en_US
dc.identifier.scopusqualityQ2
dc.identifier.startpage1251en_US
dc.identifier.urihttps://hdl.handle.net/20.500.12469/2978
dc.identifier.urihttps://doi.org/10.1093/cje/bey046
dc.identifier.volume43en_US
dc.identifier.wosWOS:000509508300004en_US
dc.identifier.wosqualityQ2
dc.institutionauthorOrhangazi, Özgüren_US
dc.language.isoenen_US
dc.publisherOxford Univ Pressen_US
dc.relation.journalCambridge Journal of Economicsen_US
dc.relation.publicationcategoryMakale - Uluslararası Hakemli Dergi - Kurum Öğretim Elemanıen_US
dc.rightsinfo:eu-repo/semantics/openAccessen_US
dc.subjectProfitsen_US
dc.subjectInvestmenten_US
dc.subjectCapital accumulationen_US
dc.subjectFinancialisationen_US
dc.subjectGlobalisationen_US
dc.subjectMonopolisationen_US
dc.subjectIntangible assetsen_US
dc.subjectIntellectual propertyen_US
dc.titleThe role of intangible assets in explaining the investment-profit puzzleen_US
dc.typeArticleen_US
dspace.entity.typePublication
relation.isAuthorOfPublicationaad6bd22-3f32-4c7f-b625-51b081f50ddd
relation.isAuthorOfPublication.latestForDiscoveryaad6bd22-3f32-4c7f-b625-51b081f50ddd

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