We develop an extended real business cycle model with financially constrained firms and non-pledgeable intangible capital. Based on a model-consistent series for firms’ borrowing conditions, we find, within a structural vector autoregression framework, that, in response to an adverse financial shock, tangible investment falls more than intangible investment. This positive co-movement between tangible and intangible investment as well as the relative resilience of intangible investment pose a challenge for the theoretical model. We show that investment-specific adjustment costs help in reconciling the model with the observed empirical evidence. The estimation of the theoretical model using a Bayesian limited information approach yields support for the presence of much larger adjustment costs for intangible investment than for tangible investment.

Intangible assets can play a strategic role in the implementation of differentiated strategies in foreign markets. The literature has addressed the impact of intangible assets on both exports and financial performance and the effects of exports on company financial performance (profit and risk). This article aims to analyze the effect of exports on the relationship between intangibles and company performance in the wine industry. Empirical studies show that intangibles have a positive but diminishing impact on exports. The effect of exports on financial performance differs depending on whether we consider corporations or cooperatives. While intangible expenses reduce company risk in both samples whatever the level of export intensity, the effects are different with profit. In corporations, intangible expenses have a positive impact on profit only when there is a high level of expenses and a high level of export intensity. (JEL Classifications: G32, L25, Q12, Q13)

This note responds to the recent critique by Goodridge, Haskel and Wallis (GHW) of our 2012 study of Britain's productivity puzzle. We show that a correct reworking of the latest official data on changes in labour composition overturns GHW's main criticism. We also question the strength of the empirical evidence offered by GHW in support of their alternative explanations of the productivity puzzle.

This note responds to a critique of our recent paper, “Can Intangible Investment Explain the UK Productivity Puzzle?”. In that critique Martin and Rowthorn (MR) present a re-working of data on labour composition which they feel refutes an element of our argument. In this response we argue that the data are still in support of our original position. Essentially, the puzzle is that measured labour productivity has been falling, but labour quality is rising, so, at least on this measure, changes in labour quality cannot explain falling productivity.

This paper investigates whether intangibles might explain the UK productivity puzzle. We note that since the recession: (a) firms have upskilled faster than before; (b) intangible investment in R&D and software has risen whereas tangible investment has fallen; and (c) intangible and telecoms equipment investment slowed in advance of the recession. We have therefore tested to see if: (a) what looks like labour hoarding is actually firms keeping workers who are employed in creating intangible assets; and (b) the current slowdown in TFP growth is due to the spillover effects of the past slowdown in R&D and telecoms equipment investment. Our main findings are: (a) measured market sector real value added growth since the start of 2008 is understated by 1.6 per cent due to the omission of intangibles; and (b) 0.75 per cent per annum of the TFP growth slowdown can be accounted for by the slowdown in intangible and telecoms investment in the early 2000s. Taken together intangible investment can therefore account for around 5 percentage points of the 16 per cent productivity puzzle.