Organizational capital, allocation of intangibles, and firm performance : Evidence from the Globalinto intangible survey

Abstract

This chapter examines the role of organizational capital investment in firm performance and how it is linked to other intangible investments, human capital, organizational capabilities (agility), and the Covid pandemic. The Globalinto survey provides data on a broad set of intangibles, the organizational capabilities of firms, and how intangibles affect performance. Organizational capital (OC) as part of intangibles in general (including branding, design, and special-purpose ICT) is shown to improve productivity, profit margins, and financial solvency, while R&D has an independent positive effect in all three ways of measuring firm performance. OC and other types of intangible capital are found to be a substantial share of turnover and are essential for European growth, especially in knowledge-intensive services. OC is heterogeneous with a clear separation of internal and external OC, and direct productivity effects can also be more related to problem-solving consulting, i.e., to external OC. This result appears to support the capability-based theory, in that internal OC also depends on how the organizational form has evolved. The results do not confirm the recent attention paid to high fixed costs due to OC and R&D investments since they, together with tangibles, generate more turnover than fixed costs.