Do Intangible Investments Create Value? Comparing Capitalization Rates of Listed Firms
Sjoerd van Bekkum
This study investigates the link between innovation investments and future economic growth at the firm-level, by examining the growth value of a dollar invested in selling, general and administrative (SGA) expenses. An international comparison is made between capitalization rates in four large sectors, which are best represented in the sample. In all sectors, SGA expenses make a positive contribution to growth value. This contribution varies, however, between sectors and countries-within-sectors and is sometimes signicantly smaller than the amount invested. This leads to the conclusion that intangible investments cannot always be capitalized at full costs, and that metrics are needed that complement financial statements, rather than replace them.
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