Intangible investments are at the heart of innovation. But what is innovation exactly? Contrast innovation, ‘doing something differently’ from duplication, ‘doing more of the same’. If an economy is using more labour and more machinery it is growing by duplication; if it is using those inputs more shrewdly, it is growing via innovation- using inputs more adeptly is what intangible investment is all about.
Growth via duplication is more common among developing countries, whereas developed countries enjoy growth beyond duplication by investing in intangible assets.
Here are some key features of our point of view:
- Tangible assets are physical investments such as buildings and machines
- Intangibles are assets such as software, R&D and design
- Developed economies tend to invest less in traditional tangible assets, and relatively more in intangibles
- Comparing the different mixes of tangibles and intangibles allows us to measure how this affects a countries performance and understand how modern economies might perform differently
- Data collected for 11 EU countries and the US
- Both intangible and tangible investment fell after the great recession but intangible investment recovered faster
- Intangible-intensive countries and industries have seen more productivity and a rise in the spread of productivity between firms
Research led by Professor Jonathan Haskel