Intangible Investments and Firm Innovation Propensity: An Empirical Study in Seven European Countries

In this chapter, we adopt the lens of the resource-based view of the firm to examine intangible assets as a diverse array of assets that drive a firm's competitive advantage, facilitating engagement in the various activities comprising the innovation process at the firm level. Specifically, we investigate the innovation impact of various aspects of investments in intangible assets based on rich survey data from firms operating in a broad set of manufacturing and services sectors, spanning seven European countries (Germany, France, the UK, Greece, Finland, Denmark, and Slovenia). By taking into account six intangible asset types, including R&D, training, software and databases, reputation & branding, design, and organization/business process improvement, the chapter aims to explore the heterogeneous range of activities that firm innovation entails by approaching intangible investments in an “unpacked manner”. Our results suggest that both technological (product and process) and non-technological (marketing and organizational) innovations are positively associated with firms’ investments in a series of intangible assets. Consequently, an appropriate mix of investments in a broader spectrum of intangible assets is critical for firms to achieve multiple innovations that constitute a strong base for creating a long-term competitive advantage.