By Josh Martin, ESCoE
The Economic Statistics Centre of Excellence (ESCoE) and the International Association for Research in Income and Wealth (IARIW) held a successful two day conference on intangible assets on 11-12 November 2021. This was the first in-person conference for most attendees in almost two years, and the irony of the intangible topic and the tangible format (with effective hybrid contributions) was not lost on attendees.
The topic for the conference stems from the continuing importance, and measurement challenges, of intangible assets. Since seminal work from keynote speaker Dan Sichel, along with Carol Corrado and Chuck Hulten, in the early 2000s, the research community has come a long way. Dan took us through the distant and recent history of intangibles, the progress to date, and the road ahead. Despite 15 years of intense research (a good portion of which was from those in attendance!) there are still many unanswered questions. You can watch Dan’s keynote in full here.
Various contributions demonstrated the continuing importance of intangible assets for aggregate and firm productivity growth (Sveikauskas, Borowiecki, Samek). Variations in intangible asset investment seem important at the bottom (Himbert, Samek) and top (Kawakubo, Oddo) of the productivity distribution. The measurement is also important and influential for national accounts (Fixler), across countries (Piekkola and Piekkola again!). Meanwhile, some authors (bravely, considering the audience!) demonstrated a lesser contribution of intangibles to growth than we might have thought (Weale, van Heuvelen).
A prevailing theme was the need for better definitions and classifications. The difficulties of collecting data on intangible investments via the various survey efforts over many years (Martin, Piekkola) might call for more innovative solutions (Stroll, Niebel).
Perhaps it is even time to revisit the influential framework of Corrado, Hulten and Sichel (2005) that has brought us so far. The closing panel reflected on the heterogeneity of intangible assets – perhaps more so than among tangible assets. The contribution of different individual intangible investments to growth might be more varied than for tangible investments, and spillovers could more often be negative as well as positive. This demands us to consider depreciation rates and price indices in more detail (Nakamura). This heterogeneity might call for a more detailed breakdown of intangible investments, or else more nuanced measures.
Software, while one of the few intangible assets capitalised in the national accounts, garnered significant discussion. Issues pertaining to current national accounts measures included the classification of software types (Sveikauskas), the treatment of software as a service (Sichel), and the interpretation of payments for licenses to use software (Sichel). Further issues were around data as an asset (Coyle, de Bondt, Heys) and open-source software (Robbins). This is clearly an area in need of more work, demonstrating that capitalisation in the national accounts does not mean the end of the road.
Organisational capital was also widely discussed. Types of organisational capital, managerial capital and business model innovation (Li, Schneebacher, Jona-Lasinio) might warrant clearer separation. The relationship between data and organisational capital (Li) is also relevant. Branding investments might also benefit from refinement: they can be substantial (Berndt) but advertising to consumers and customers is quite different, which might imply variation in depreciation rates and price indices (van Ark).
We saw many measurement approaches presented, reflecting various accumulation channels (Schneebacher). Valuation approaches for data, many of which also apply more widely, include conventional methods like market prices and sum of costs, but could also include stock market valuation, option values, and willingness to pay (Coyle). While sum of costs approaches are often operational (Piekkola, de Bondt), they might be inadequate (Coyle, Heys). Modern data and methods (like web-scraping and machine learning) might also offer potential, but need further work (Niebel).
The broader framework might also need reviewing. Standard productivity analyses in a linear growth accounting framework does not account well for spillovers and synergies, characteristics of intangibles articulated by Haskel and Westlake (2017). Spillovers clearly exist from research and development (Nakamura), but also from advertising (Sveikauskas, van Ark), open-source software (Robbins) and other investments. How should we think about the value of intangible assets after their private benefit ends, and how should we think about depreciation of intangibles (Nakamura)? There are also synergies between different types of intangibles and between intangibles and tangibles (Weiss). Finally, should we dispense of accounting in gross terms altogether, and instead focus on net accounting (Weale)?
Jonathan Haskel in his keynote address considered the role of intangibles in explaining phenomena in the modern economy, including the slowdown in productivity growth in the past decade. Thankfully, it seems no such slowdown has been found in the intangibles field! Watch Jonathan’s presentation here.
Personally, I thoroughly enjoyed the conference. I come away with new connections, new knowledge, and a renewed love of the field. While the conference may have delivered more questions than answers, it also promises to lead to more progress. Despite the phrase being banned in the closing panel, clearly “more research is needed”. As well as learning and talking about intangible assets, the conference gave attendees the opportunity to interact with colleagues, collaborators, and veritable rockstars of the field! Thank you to the organisers, and the beautiful RSA House for hosting.
You can find links to the conference programme, as well as all the slides and recordings (where available) here.
Josh Martin is Head of Productivity, Office for National Statistics, and an ESCoE Topic Lead.
ESCoE blogs are published to further debate. Any views expressed are solely those of the author(s) and so cannot be taken to represent those of the ESCoE, its partner institutions or the Office for National Statistics.