Working Paper: NBER ID: w15799
Authors: Charles R. Hulten
Abstract: A great deal of research has been devoted to the effects of technical change on economic growth. Less attention has been given to the factors driving the growth of the technological innovators themselves. This paper examines the case of one of the central contributors to the IT revolution, the Microsoft Corporation. The company's sources of growth are estimated using the conventional Solow-Jorgenson-Griliches "residual" model, expanded to include investments in product research and development, sales and marketing, and organizational development (collectively termed the company's "intangible" capital). The picture of Microsoft that emerges from this analysis is a story about the successful use of knowledge inputs to produce knowledge outputs. It is also a story of the importance of product innovation, rather than process innovation, as a source of total factor productivity growth. The theoretical underpinnings of the empirical analysis are also examined, and a model is sketched in which the neoclassical growth accounting framework is linked to the theoretically messier world of the Schumpeterian competitor via the Berndt-Fuss theorem on capital utilization.
Keywords: Microsoft; intangible capital; economic growth; productivity
JEL Codes: O32; O47
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| intangible capital (E22) | output growth (O40) |
| intangible capital (E22) | total factor productivity (TFP) growth (O49) |
| intangible capital (E22) | shareholder equity (G32) |
| intangible capital (E22) | return on equity (D33) |