TY  - JOUR
AU  - Cummins,Jason G.
TI  - A New Approach to the Valuation of Intangible Capital
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9924
PY  - 2003
Y2  - August 2003
UR  - http://www.nber.org/papers/w9924
L1  - http://www.nber.org/papers/w9924.pdf
N1  - Author contact info:
Jason Cummins
Brevan Howard Asset Management
Suite 250
1776 Eye Street, NW
Washington, DC 20006
Tel: 202-835-6401
E-Mail: jason.cummins@brevanhoward.com
M1  - published as Jason G. Cummins. "A New Approach to the Valuation of Intangible Capital," in Carol Corrado, John Haltiwanger and Dan Sichel, editors, "Measuring Capital in the New Economy" University of Chicago Press (2005)

AB  - In this paper, I argue that intangible capital is not a distinct input to production like physical capital or labor but rather it is the glue that creates value from other inputs. This perspective naturally leads to an empirical model in which intangible capital is defined in terms of adjustment costs. Estimates of these adjustment costs using firm-level panel data suggest that there are no appreciable intangibles associated with R&D and advertising whereas information technology creates intangibles with a 70% annual rate of return   a sizable figure that is nevertheless much smaller than reported in previous studies. As a bridge to previous research, I show that much larger estimates can be obtained by using ordinary least squares, which ignores the possibility that the value of the .rm and its investment policy are simultaneously determined. Larger estimates can also be obtained by ignoring the possibility that the stock market overstates the value of intangible-intensive companies.
ER  -