The generation and exploitation of technological change: market value and total factor productivity |
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Authors: | Cristiano Antonelli Alessandra Colombelli |
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Institution: | 1.Dipartimento di Economia,Università di Torino,Torino,Italy;2.CRENoS,Università di Cagliari,Cagliari,Italy;3.BRICK (Bureau of Research in Innovation Complexity and Knowledge),Collegio Carlo Alberto,Moncalieri, Torino,Italy |
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Abstract: | In this paper we articulate and test the hypothesis that TFP is a reliable and relevant measure of firm’s innovation capabilities,
and, as such, accounts for Tobin’s q indicator. With this aim, we investigate empirically the relationship between firm level total factor productivity and the
Tobin’s q. Measuring Tobin’s q allows inferring the actual value of knowledge capital from stock market valuation. We use a panel of companies listed on
UK and the main continental Europe financial markets (Germany, France and Italy) for the period 1995–2005. Our results confirm
that TFP is a reliable indicator of firm’s innovative capabilities. When we control for firm’s R&D investments and intangible
assets, the effects of TFP on market value remain highly significant. This suggests that TFP is a broader measure of innovation
capability than R&D is. The validation of the Tobin’s q and TFP relationship has important implications concerning firm’s technological innovation measurement. |
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