Erik Brynjolfsson, Lorin M. Hitt, Daniel Rock, Prasanna (Sonny) Tambe
Working Paper (forthcoming Brookings)
Publication year: 2019

General purpose technologies like IT and AI typically require complementary investments in firm-specific human and organizational capital to create value for firms. However, good measures of the stock of this IT intangible capital (ITIC) have remained elusive, as has an understanding of how the accumulation of ITIC contributes to economic growth. We use a new extended firm-level panel on IT skills along with Hall’s Quantity Revelation Theorem to assess the nature and growth of ITIC over the last thirty years. We then examine implications for the current wave of AI investment. Our estimates suggest that ITIC accounted for about 25% of firms’ total assets by 2016 and that this capital is disproportionately owned by small subset of “superstar” firms. During most of the period we examine, these assets depreciated close to the same rate as R&D, but depreciation rates appear to have been accelerating with the diffusion of AI-based innovations. For the recent wave, high market values are associated with AI before they are associated with increased revenues or productivity, suggesting that investors anticipate significant future returns to AI-related intangible assets that are otherwise unmeasured.