Kellogg School of Management
2001 Sheridan Road
Evanston, IL 60208
Institutional Affiliation: Northwestern University
NBER Working Papers and Publications
|May 2019||Understanding Weak Capital Investment: the Role of Market Concentration and Intangibles|
with Janice C. Eberly: w25869
We document that the rise of factors such as software, intellectual property, brand, and innovative business processes, collectively known as “intangible capital” can explain much of the weakness in physical capital investment since 2000. Moreover, intangibles have distinct economic features compared to physical capital. For example, they are scalable (e.g., software) though some also have legal protections (e.g., patents or copyrights). These characteristics may have enabled the rise in industry concentration over the last two decades. Indeed, we show that the rise in intangibles is driven by industry leaders and coincides with increases in their market share and hence, rising industry concentration. Moreover, intangibles are associated with at least two drivers of rising concentration: m...