Out-of-equilibrium and intangible assets

The new evidence provided by the codification of intangible assets in national accounts and firm statistics provides the opportunity to test the Schumpeterian creative response hypothesis according to which (i) the generation and exploitation of knowledge are characterized by high levels of risk, (ii) firms in equilibrium are reluctant to undertake risky activities, (iii) the farther away from equilibrium conditions, the stronger the firm's willingness to introduce innovation, (iv) the creative response effect is heterogeneous across firm size, age, and industry technological content. Empirical evidence for publicly listed companies in the US during 1977-2016 confirms a U-shaped relationship between out-of-equilibrium performance and intangible intensity growth. Moreover, we estimate a deeper U-shaped relationship between performance and growth in intangibles intensity for small and young firms and, on average, for firms in high-tech industries. Our results are robust to different econometric tests performed on alternative samples. An original instrumental variable strategy further strengthens the validity of our results. We conclude that the firm creative response is an out-of-equilibrium phenomenon, stronger in the case of disappointing performances and sharper for small, young, and high-tech firms.