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Investing in Customer Capital

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Listed:
  • Bianca He
  • Lauren I. Mostrom
  • Amir Sufi

Abstract

Firms invest heavily in customer capital, and such investment is a main source of intangible capital value. Investment in customer capital is measured using sales and marketing expense from income statements, information on salaries paid to workers in sales and marketing, and text from annual 10-K SEC filings describing firms’ sales and marketing strategies. There is large and persistent variation across industries in customer capital investment; industries investing the most are growing as a share of aggregate revenue and enterprise value. Industry-level variation in sales and marketing expense and R&D expense explains a large amount of the variation in the value of intangible capital, a result shown using both publicly-traded companies and prices paid in acquisitions. Residual sales, general, and administrative expense after subtracting sales and marketing expense is uncorrelated with intangible capital value. Industries focused on platform business models, online sales, and the production of high tech manufactured goods invest most heavily in customer capital.

Suggested Citation

  • Bianca He & Lauren I. Mostrom & Amir Sufi, 2024. "Investing in Customer Capital," NBER Working Papers 33171, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:33171
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    More about this item

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • G3 - Financial Economics - - Corporate Finance and Governance
    • M30 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - General

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