Revisiting intangible capital and labour productivity growth, 2000–2015. Accounting for the crisis and economic recovery in the EU

DOIhttps://doi.org/10.1108/JIC-05-2019-0119
Pages671-690
Date03 April 2020
Published date03 April 2020
AuthorFelix Roth
Subject MatterAccounting & Finance,HR & organizational behaviour,Organizational structure/dynamics,Information & knowledge management,Accounting/accountancy
Revisiting intangible capital
and labour productivity growth,
20002015
Accounting for the crisis and economic recovery
in the EU
Felix Roth
Department of Economics, University of Hamburg, Hamburg, Germany
Abstract
Purpose This paper aims to revisit the relationship between intangible capital and labour productivity
growth using the largest, up-to-date macro database (20002015) available to corroborate the econometric
findings of earlier work and to generate novel econometric evidence by accounting for times of crisis (2008
2013) and economic recovery (20142015).
Design/methodology/approach To achieve these aims, this paper employs a cross-country growth
accounting econometric estimation approach using the largest, up-to-date database available encompassing 16
EU countries over the period 20002015. The paper accounts for times of crisis (20082013) and of economic
recovery (20142015). It separately estimates the contributionof three distinct dimensions of intangible capital:
(1) computerized information, (2) innovative property and (3) economic competencies.
Findings First, when accounting for intangibles, the paper finds that these intangibles have become the
dominant source of labour productivity growth in the EU, explaining up to 66 percentof growth. Second, when
accounting for times of crisis (20082013), in contrast to tangible capital, the paper detects a solid positive
relationship between intangibles and labour productivity growth. Third, when accounting for the economic
recovery (20142015), the paper finds a highly significant and remarkably strong relationship between
intangible capital and labour productivity growth.
Originality/value This paper corroborates the importance of intangibles for labour productivity growth
and thereby underlines the necessity to incorporate intangibles into todays national accounting frameworks in
order to correctly depict the levels of capital investment being made in European economies. These levels are
significantly higher than those currently reflected in the official statistics.
Keywords Intangible capital, Labour productivity growth, Crisis, Recovery, European Union
Paper type Research paper
1. Introduction
Recent research reports a disappointing performance in labour productivity growth among
EuropeanUnion (EU) and euro area(EA) countries since thestart of the crisis from 2008to 2015
(Van Ark and J
ager, 2017). According to this literature, this performance stems largelyfrom a
slower diffusion of technology and innovation due to low growth rates of information and
communicationtechnology (ICT) and complementary intangible capital investment (Van Ark
and J
ager, 2017,p.15;Van Ark, 2016,pp.3741; Van Ark and OMahony, 2016,pp.132138).
Intangible
capital and
labour
productivity
671
The author wishes to thank the participants at the 15th World Conference on Intellectual Capital for
Communities in Paris (July 2019), the GLOBALINTO meeting in Athens (September 2019) and the
GLOBALINTO workshop on Advancing the Measurement of Intangibles for European economies in
Brussels (January 2020) for constructive comments. He would also like to thank Simone Cali
o for
excellent research assistance. Moreover, Dr. Roth is grateful for a grant received from the European
Commission under the Horizon 2020 programme for the GLOBALINTO project (Capturing the value of
intangible assets in micro data to promote the EUs growth and competitiveness, contract number
822259). And finally, he expresses his gratitude to Ahmed Bounfour, Hannu Piekkola, Felicitas Nowak-
Lehmann, Thomas Straubhaar, Iulia Siedschlag, Robert Stehrer and Josh Martin for their valuable
comments.
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1469-1930.htm
Received 30 May 2019
Revised 31 August 2019
12 January 2020
Accepted 5 February 2020
Journal of Intellectual Capital
Vol. 21 No. 5, 2020
pp. 671-690
© Emerald Publishing Limited
1469-1930
DOI 10.1108/JIC-05-2019-0119
Indeed, a recent growth-accounting study at the macro level over the period 20002013
identifies the deepening of intangible capital as a main driver of labour productivity growth
(Corradoet al., 2018, p. 11). Such findingsare in line with existing growth-accounting studiesfor
the US (Corrado et al., 2009), the UK (Marrano et al.,2009), Japan (Fukao et al., 2009), Sweden
(Edquist, 2011) andthe EU-15 (Corrado et al.,2013).
Within this substantial body of growth-accounting evidence, however, there exists only
scarce econometric evidence at the macro level of the impact of intangible capital investment
on labour productivity growth. The only existing econometric study analyses an EU-13
country sample for pre-crisis times from 1998 to 2005 (Roth and Thum, 2013). This scarcity
of growth econometric studies is remarkable in light of their general advantages in
comparison to growth accounting studies (Temple, 1999, pp. 120121). To help close this gap
in the research, this paper conducts an econometric analysis using a cross-country
growth-accounting approach covering 16 EU countries over the period 20002015. This
approach overcomes earlier work in two ways. First, the paper is able to corroborate earlier
econometric findings (Roth and Thum, 2013) with the help of a greatly extended dataset
containing more than two and half times the number of overall observations (256 versus 98).
Second, by covering a period until 2015, the paper is able to generate novel econometric
findings on the impact of intangible capital deepening on labour productivity growth by
accounting for times of crisis (20082013) and times of economic recovery (20142015).
By matching the most recent release of the INTAN-Invest (NACE2)[1] dataset (Corrado
et al., 2018) with the latest figures from the EU KLEMS[2] dataset (J
ager, 2017), in combination
with a wide range of growth-relevant policy variables from Eurostat, OECD and the World
Bank, this paper provides the largest up-to-date intangible capital panel dataset at the
macro-level containing an overall number of 256 country observations. Estimating a slightly
modified model specification as developed within the existing literature (Roth and Thum,
2013, p. 495) with the help of a cross-country growth-accounting econometric approach, the
paper reaches three major findings. First, in line with the previous growth econometric
literature (Roth and Thum, 2013), the paper confirms that once intangibles are accounted
for, they become the dominant source of labour productivity growth in the EU, explaining up
to 66 percent of this growth. Second, when accounting for times of crisis (20082013),
this paper finds that even when the relationship between tangible capital and labour
productivity turned negative, the impact of intangibles on growth remained solidly positive.
Third, when accounting for the economic recovery (20142015), we find a highly significant
and remarkably strong relationship between intangible capital and labour productivity
growth.
2. Theoretical linkages between intangible capital and labour productivity
growth
The earliest work highlighting the importance of intangible capital for labour productivity
reaches back as far as the 1960s (Haskel and Westlake, 2018, p. 38). Based on research by
Brynjolfson et al. (2002) and Nakamura (2001), amongst others, Corrado et al. (2005) developed
a methodological framework for the US of how to account for business intangibles in the new
economy. The authors used an intertemporal framework for investment and grouped the
various business intangibles into three broad dimensions: 1) computerized information,
namely software, 2) innovative property, namely research & development (R&D) and
3) economic competencies, namely brand names, firm-specific human capital and
organizational capital. Conducting a growth-accounting analysis alongside their
methodological framework, Corrado et al. (2009) showed that business intangibles were
able to explain a significant share of labour productivity growth. Using growth-accounting
studies, similar results were found for the UK (Marrano et al., 2009), Japan (Fukao et al., 2009),
JIC
21,5
672

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT