This paper investigates the proposition that the widespread use of information technology has increased investment in intangible organizational assets. Using firm-level data, we find that each dollar of installed computer capital in a firm is associated with at least five dollars of market value, after controlling for other assets. We interpret this value as revealing the existence of a large stock of intangible assets that are complementary with computer investment. Using data on organizational practices at each firm, we identify a specific cluster of practices that appear to represent at least some portion of these intangible assets. Not only are these practices correlated with computer investments, but firms that combine higher computer investments with these organizational characteristics have disproportionate increases in their market valuations. We conclude that investors believe that the contribution of computers is increased when they are combined with certain intangible assets, specifically including the cluster of organizational changes that we have identified.
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