This discussion paper is a great 20 minute read that investigates if more investments in intangible assets could breathe life into productivity and unlock more growth potential.
Key take outs:
1) Rising investment in intangibles has been linked with increasing total factor productivity of entire economies.
2) Firms that invest most in intangibles are outperforming their peers. Top growers, defined as companies in the top quartile of growth by sector in 2018–19 are investing 2.6 times more in intangibles than low growers.
3) During the COVID-19 pandemic, companies that invested significantly in all four main types of intangible capital—innovation capital, digital and analytics capital, human and relational capital, and brand capital—were able to maintain 2019 levels of growth.
4) Effective deployment and use of intangibles distinguish top growers from low growers.
Insight:
The evidence is stacking up in an age increasingly driven by innovation and knowledge that firms and sectors that invest most heavily in intangibles are reinforcing and deepening their competitive advantage and achieving the highest rates of growth in gross value added. But investment in intangibles is only a starting point. The full potential of these game-changing assets will not be realized unless companies are smart about how they deploy them to create synergies and scale, and enhance a range of capabilities that can deliver on growth.
