Profit Rates and Intangible Capital

Pamela Megna · Dennis C. Mueller

102 citations0/0 files storedThe Review of Economics and Statistics

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Intellectual Capital and Performance Analysis Economic Growth and Productivity Firm Innovation and Growth

Abstract

A central question in industrial organization is why profit rates differ so dramatically across firms and industries. One of the many explanations offered for this phenomenon is the failure of conventional accounting methods to adjust for intangible capital stocks, i.e., it is argued that profit rates do not differ dramatically when capital stocks are correctly calculated to include intangible R&D and advertising capital. To test this hypothesis individual advertising capital stocks are calculated for firms in the toys, distilled beverages, cosmetics, and pharmaceuticals industries, and R&D stocks are calculated for the pharmaceuticals firms. The adjustments do not eliminate the wide dispersion in profit rates. Copyright 1991 by MIT Press.

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References

1973Industry Structure, Market Rivalry, and Public Policy 2016On the Misuse of Accounting Rates of Return to Infer Monopoly Profits 1976Econometric Measurement of the Duration of Advertising Effect on Sales 1967Advertising Market Structure and Performance 1986Profits in the Long Run 1983Structure-Profit Relationship at the Line of Business and Industry Level 1972The Elements of Market Structure 1974Consumer Behavior, Retailer Power and Market Performance in Consumer Goods Industries

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