Decoding Microsoft: Intangible Capital as a Source of Company Growth

40 Pages Posted: 8 Mar 2010 Last revised: 5 Sep 2010

See all articles by Charles R. Hulten

Charles R. Hulten

University of Maryland - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: March 2010

Abstract

A great deal of research has been devoted to the effects of technical change on economic growth. Less attention has been given to the factors driving the growth of the technological innovators themselves. This paper examines the case of one of the central contributors to the IT revolution, the Microsoft Corporation. The company's sources of growth are estimated using the conventional Solow-Jorgenson-Griliches "residual" model, expanded to include investments in product research and development, sales and marketing, and organizational development (collectively termed the company's "intangible" capital). The picture of Microsoft that emerges from this analysis is a story about the successful use of knowledge inputs to produce knowledge outputs. It is also a story of the importance of product innovation, rather than process innovation, as a source of total factor productivity growth. The theoretical underpinnings of the empirical analysis are also examined, and a model is sketched in which the neoclassical growth accounting framework is linked to the theoretically messier world of the Schumpeterian competitor via the Berndt-Fuss theorem on capital utilization.

Suggested Citation

Hulten, Charles R., Decoding Microsoft: Intangible Capital as a Source of Company Growth (March 2010). NBER Working Paper No. w15799, Available at SSRN: https://ssrn.com/abstract=1565899

Charles R. Hulten (Contact Author)

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
36
Abstract Views
421
PlumX Metrics