Production of intangible investment and growth: Methodology in INNODRIVE

We develop a methodology for evaluating companies’ investment in intangible assets using linked employer-employee data. Firms produce goods of the types: (i) information and communications technology (ICT), (ii) research and development (R&D), and (iii) organizational capital (OC). If the use of these goods is not in the current year they can be classified as intangible capital formation, which is typically ignored in conventional calculations of capital stocks and depreciation. In order to produce intangible capital goods, firms apply resources supplied by different factors of production: labor, intermediate, and capital services. We compare an expenditures-based approach to measuring firms’ intangible investments, where investment is proportional to the salary costs of workers in particular occupations, to a performance-based approach, where investment is proportional to the productivity of these workers. The former approach is similar to the method commonly adopted in constructing national measures of intangible capital formation.