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Firm Age, Productivity, and Intangible Capital

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  • Kaoru HOSONO
  • Miho TAKIZAWA
  • Kenta YAMANOUCHI

Abstract

We examine the role of intangible capital investment in firm growth in sales and productivity over age. To this end, we first document how firm sales evolve with age using a large dataset from Japan covering the periods of 1991 and 1994-2015. Second, we construct a model to show the relationship between firm sales and the three parameters: markup, physical productivity (TFPQ), and factor price distortion, which vary across firms and over time. We estimate these parameters at the firm-year level using the dataset and quantify the impacts of each parameter on sales growth by simulating the hypothetical sales growth with each parameter fixed to the initial value for each firm. Third, we estimate the effects of intangible capital on sales through each parameter of sales. Our findings can be summarized as follows. First, firm sales grow with age up to about 30 years after entry. Second, TFPQ increases with firm age and has dominant effects on sales growth compared to markup and factor price distortion. Third, intangible capital has significant effects on sales growth through TFPQ. Among the three types of intangible capital, organizational capital accounts for a major portion of sales growth.

Suggested Citation

  • Kaoru HOSONO & Miho TAKIZAWA & Kenta YAMANOUCHI, 2020. "Firm Age, Productivity, and Intangible Capital," Discussion papers 20001, Research Institute of Economy, Trade and Industry (RIETI).
  • Handle: RePEc:eti:dpaper:20001
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    References listed on IDEAS

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    Cited by:

    1. Lovo,Stefania & Varela,Gonzalo J., 2020. "Internationally Linked Firms, Integration Reforms and Productivity : Evidence from Pakistan," Policy Research Working Paper Series 9349, The World Bank.
    2. Stefania Lovo & Gonzalo Varela, 2022. "Internationally Linked Firms and Productivity in Pakistan: A Look at the Top End of the Distribution," Journal of Development Studies, Taylor & Francis Journals, vol. 58(10), pages 2110-2131, October.
    3. Kaoru HOSONO & Miho TAKIZAWA & Kenta YAMANOUCHI, 2022. "Financial Constraints and Markups," Discussion papers 22012, Research Institute of Economy, Trade and Industry (RIETI).

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