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CEP discussion paper
Measuring Organization Capital in Japan: An Empirical Assessment Using Firm-Level Data
YoungGak Kim and Tsutomu Miyagawa
August 2007
Paper No' CEPDP0817:
Full Paper (pdf)

JEL Classification: L21; L23; L25

Tags: adjustment cost of investment; intangible asset; organizational capital; tobin's q; total factor productivity.

Globalization and the ICT revolution of the 1990s have forced many firms to reorganize in order to survive in a more competitive market. There are several approaches that can be used to assess the measurement of organization capital since it is unobservable. Using an optimizing firm model and assuming that a firm holds multiple assets as suggested by Yang and Brynjolfsson (2001) and Cummins (2005), we examined whether organization capital is accumulated with investment in several types of assets. In contrast to Cummins’s (2005) results, we found that the accumulation of organization capital is associated with investment in R&D assets and marketing assets. Using these results and following Basu, Fernald, Oulton, and Srinivasan (2003), we measured the contribution of organization capital to the conventional TFP growth. The estimation results implied that the growth of organization capital did not have significant effects on productivity growth.