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Complementarity Between Tangible And Intangible Capital: Evidence From Japanese Firm-Level Data

Author

Listed:
  • KAORU HOSONO

    (Faculty of Economics, Gakushuin University, 1-5-1 Mejiro, Toshima-ku, Tokyo 171-8588, Japan)

  • 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)

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.

Suggested Citation

  • Kaoru Hosono & Daisuke Miyakawa & Miho Takizawa & Kenta Yamanouchi, 2020. "Complementarity Between Tangible And Intangible Capital: Evidence From Japanese Firm-Level Data," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 65(05), pages 1293-1321, September.
    • Handle: RePEc:wsi:serxxx:v:65:y:2020:i:05:n:s0217590819500735
    DOI: 10.1142/S0217590819500735
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    Cited by:

    1. Grazzini Lisa & Petretto Alessandro, 2022. "Heterogeneous capital tax competition in a federation with asymmetric tax compliance," German Economic Review, De Gruyter, vol. 23(4), pages 669-705, December.

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