Document Type : Research Paper

Authors

• Esfandiar Jahangard ¹
• Teymour Mohammadi ²
• Ali Asghar Salem ¹
• Forough Esmaeily Sadrabadi ³

¹ Associate Professor, Economic, Allameh Tabataba'i University, Tehran, Iran

² Professor, Economic, Allameh Tabataba'i University, Tehran, Iran

³ Ph.D. Student, Economic, Allameh Tabataba'i University, Tehran, Iran

Abstract

The question that is considered by researchers in the field of knowledge-based economy is that among the factors affecting intangible investment, does information and communication technology have a heavier weight than the rest of the factors? In this study, using the Corrado,Hulten and Sichel (CHS) approach, the measurement of intangible investment is calculated. In their research, intangible investment has been divided into three major parts: computer information, innovative assets, and economic competencies. Then these three components are divided into nine parts. In this article, we select the component of information and communication technology, which is the first component of intangible transitory capital, and its effect on Total Factor Productivity(TFP) has been investigated. The field of study is manufacturing industries with a four-digit economic activity classification code for employees of ten and above during the years 1996 to 2018. Using panel data and GMM, the productivity function was estimated for manufacturing industries. The results of this research show that ICT has a significant role on the productivity of all production factors, and its coefficient is higher than other intangible investment components.

Highlights

.

1-       Introduction

Intangible investment, as an important and growing component of total investment, is increasingly important for analyzing current economic trends and forecasting future growth. Similar to investment in tangible assets, expenditures made by industries or governments on intangible investments behave like gross fixed capital formation and create a significant and growing share in total investment.

In order to manage intangible resources as a source of growth at the macroeconomic level and a driver of value creation for individual enterprises, it is very important to measure them. It is obvious that many studies have focused on intangible investment, which shows the importance of this topic.

One of the important issues in any economy is the impact of intangible investment measurement on real economic variables. This study first tries to estimate the share and trend of intangible capital in the activities of manufacturing industries in Iran, which is important for Iran's economy due to the lack of studies in this field. Also, the effect of one of its component(Information and Communication Technology, ICT) on total factor productivity  is one of the focal points of this study, which can have constructive suggestions in order to advance future goals.

2-       Methods and Material

In order to measure intangible capital in Iran, we follow the approach of CHS, who classify intangibles into three major types of assets: computerized information, innovative property, and economic competencies. Computerized information consists of, for instance, software and databases. Although the innovative property category of intangibles includes the familiar R&D spending data as one of its components, this is a broader category. It reflects not only the scientific knowledge embedded in patents, licenses, and general know-how (not patented) but also the innovative and artistic content in commercial copyrights, licenses, and designs. The category thus encompasses what we term “nonscientific R&D” in addition to the familiar “scientific R&D” component[1]. Brand equity and firm- specific resources include economic competencies.

 In Iran's economy, intangible capital is "Computer Software", "Information and Communication", "Research and Laboratory", "Advertising, Exhibitions and Press" and "Educational Services" based on ISIC code of manufacturing industries can cover nine points of the CHS approach. The time course of the impact of information and communication technology on the economy follows Schumpeter's law for the impact process of general purpose technology (GPT). Studies conducted on the impact of ICT on the growth of production and productivity of developed countries confirm the Schumpeterian process of technological development in the case of ICT. It affects the efficiency of manufacturing companies in three ways. First, the direct effect, which is similar to the effect of other factors of production on production, i.e. capital deepening. The second is the indirect effect or internal spillover, which means increasing the efficiency of other inputs due to the use of ICT. The third effect is the external spillover effect. The use of ICT in one company increases efficiency in other companies as well.

3-       Results and Discussion

By examining the data of Iran's manufacturing industries, in the studied codes, production of motor vehicles, manufacturing of measuring equipment, production of iron and steel, etc. have the largest share of ICT in intangible capital.

Solow recommends functions in the form of Cobb-Douglas to calculate total factor productivity (TFP). By separating ICT from intangible investment in the production model, including intangible investments, physical investment, and labor, the GMM was investigated for panel data.

The results show when information and communication technology on the TFP model is increased by one unit ,TFP will be increased by 0.5 unit, showing high impact of ICT on TFP. The Non-Information and Communication Technology (NICT) intangible is  also trivial (approximately 0.03), meaning that the use of more non-Information and Communication Technology (NICT)  will increase the TFP very slightly. Also, if physical capital and labor force  increase by 1% , the TFP  increases 0.26% and .03% on average ,respectively.

4-       Conclusion

The importance of intangible investment is increasing compared to the amount of investment in tangible capital, including transportation infrastructure, machinery and power plants, etc. As a result, the role of intangible investment becomes increasingly important for understanding and predicting productivity trends, economic growth and innovation. This research answers the question that if manufacturing decide to increase their ICT investment (which is one of the intangible investments), will their TFP also increase?

Our findings of four-digit ISIC codes of Iranian industries during the years 1996 to 2018  indicate that information and communication technology, research and development, advertising brands, educational and research services, Laboratory,etc. can be mentioned among the factors affecting the investment of intangible capital.

Ultimately,among the factors affecting TFP ,the impact of investment in skilled and specialized human force, information and communication technology on TFP has a larger impact  in comparison other factors relation intangible investment.Therefore, intangible investment, especially information and communication technology,is crucial to achieve an optimal TFP. Higher investment in these fields are suggested accordingly.

[1]. Corrado,C., et al.(2005)

Keywords

• Intangible Capital
• Information and Communication Technology
• Total Factor Productivity
• CHS Approach
• Panel Data

20.1001.1.17260728.1402.28.94.1.4

Main Subjects

• Information and communication technology economy