Journal of Productivity Analysis

, Volume 41, Issue 3, pp 443–456 | Cite as

Intangible investment in people and productivity

  • Pekka Ilmakunnas
  • Hannu Piekkola


Organizational activity, information and communication technology work, and research and development (R&D) can be classified as work that creates intangible capital. We measure the returns to these three types of labor input by accounting for differences in their productivity compared with other labor inputs using Finnish firm-level data from 1998 to 2008. We apply a novel idea to use hiring as one proxy for productivity and demand shocks. We find that organizational workers increase total factor productivity and improve the profitability of high-productivity firms. R&D workers account for a large share of intangible capital; however, the returns to R&D are low. Investments in organizational competence are more likely to result in more rapid productivity growth. Firms with performance-related pay or domestically owned firms with extensive foreign activities have been among the highest performers with respect to the use of organizational work.


Intangible capital Organizational capital R&D Productivity analysis Linked employer–employee data 

JEL Classification

O40 O30 J31 M12 J62 



This paper is part of the Innodrive project financed by the EU 7th Framework Program No. 214576. The project studied intangible capital using micro data from six countries. We would like to thank the three anonymous referees for their helpful comments.


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Copyright information

© Springer Science+Business Media New York 2013

Authors and Affiliations

  1. 1.Department of EconomicsAalto University School of BusinessHelsinkiFinland
  2. 2.Department of EconomicsUniversity of VaasaVaasaFinland

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