Innovation and productivity in services: The role of organisational capital and IT

We study the role of intangible assets in the innovation process and in determining the productivity performance of service sector firms. To do this we estimate a version of the CDM-model using data on UK service sector firms from the Community Innovation Surveys linked with data on firms' own-account intangible assets. We find that organisational capital and IT are linked with firms' productivity performance both directly and indirectly through their role in the innovation process. These relationships are most evident amongst firms in the knowledge intensive service sectors. The associations between organisational capital and productivity performance are particularly strong, and are robust to our attempts to take into account firms' use of human capital.