Working Paper: NBER ID: w28285
Authors: Prasanna Tambe; Lorin Hitt; Daniel Rock; Erik Brynjolfsson
Abstract: General purpose technologies like information technology typically require complementary firm-specific investments to create value. These complementary investments produce a form of capital, which is typically intangible and which we call digital capital. We create an extended firm-level panel on IT labor investments (1990-2016) using data from LinkedIn. We then apply Hall’s Quantity Revelation Theorem to compute both prices and quantities of digital capital over recent decades. We find that 1) digital capital prices vary significantly over time, peaking around the dot-com boom in 2000, 2) significant digital capital quantities have accumulated since the 1990s, with digital capital accounting for at least 25% of firms’ assets by the end of our panel, 3) that digital capital has disproportionately accumulated in a small subset of “superstar” firms and its concentration is much greater than the concentration of other assets, and 4) that digital capital accumulation predicts firm-level productivity about three years in the future.
Keywords: No keywords provided
JEL Codes: D24; D25; M21; O32; O33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| digital capital accumulation (E22) | firm-level productivity (D22) |
| digital capital prices (G19) | digital capital quantities (E22) |
| digital capital accumulation (E22) | market value (D46) |
| digital capital concentration (E22) | market value (D46) |
| market value (D46) | productive capacity (E23) |