The Value and Ownership of Intangible Capital

Abstract

Intangible capital which relies on essential human inputs, which we will refer to as “organization capital,” is an increasingly important part of the US and global capital stock. According to Corrado, Hulten, and Sichel (2009), this type of capital is the single largest category of business intangible capital, accounting for about 30 percent of all intangible assets in the United States. Two key features of organization capital are: (i) it is partly firm specific, and (ii) it is partly embodied in key labor inputs such as managers, engineers, sales people, and research employees. The distinct ownership structure resulting from these unique features presents a significant challenge for measurement. It has long been recognized that book assets understate corporate intangible assets. However, we believe we are the first to emphasize that a large fraction of the most quantitatively important category of intangible assets will not show up in market values either.