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Acquisition Prices and the Measurement of Intangible Capital

We use 1,521 acquisition purchase price allocations to estimate intangible capital stocks. The estimated depreciation of knowledge capital (R&D) is 32%, some 28% of SG&A represents investment in organizational capital and parameter estimates exhibit significant industry variation. Aggregating these accounts, 75% of intangibles come from organizational capital, and total stocks are 10% smaller versus stocks using prior parameters. Adjusting for intangibles, average market-to-book falls from 1.74 to an average of one. Relative to existing approaches, our stocks improve the explanatory power of enterprise value, human capital and brand rankings, while exhibiting the expected correlations with patent valuations and investment rates. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.