Complementarity and Substitutability between Tangible and Intangible Capital: Evidence from Japanese firm-level data

         
Author Name HOSONO Kaoru (Faculty Fellow, RIETI) / MIYAKAWA Daisuke (Hitotsubashi University) / TAKIZAWA Miho (Toyo University) / YAMANOUCHI Kenta (Keio University)
Creation Date/NO. March 2016 16-E-024
Research Project Microeconometric Analysis of Firm Growth
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Abstract

Using Japanese firm-level panel data spanning from 2000 to 2013, we estimate industry-level production functions that explicitly take into account the substitutability and complementarity between tangible and intangible capital. The estimation results show substantial heterogeneity among industries in terms of substitutability and complementarity between tangible and intangible capital. We further find that the relation between tangible and intangible capital in the production function accounts for their relation in investments. These findings show the necessity to take into account the relation between the dynamics of tangible and intangible capital for precisely understanding the mechanisms governing a firm's growth.