This article discusses the relation between different concepts of investment in firms. In addition to the traditional notion of investment which focuses on investment in fixed assets, the concepts of innovation and intangibles have gained increasing attention in research. While distinguishing between different types of fixed and intangible investment, we investigate the relation between these categories and innovative activities and analyse the determinants of investment and innovation decisions of firms. We use data from the German innovation survey to estimate the amount of investment in tangibles and intangibles and the overlap between these investments and innovation expenditure for individual sectors. Multivariate analyses show that firms’ investment decisions are driven by different features of their market environment. Firms in markets that are characterised by strong technological competition and short product cycles invest more in intangibles, particularly intangibles related to innovation. A high price competition and low entry barriers exert disincentives to invest into R&D. For an innovation-oriented economic policy these results imply that government incentives for more R&D are needed to spur technological competition among firms and thus provide stimulus for more innovation. One such incentive is financial support to firm R&D which can compensate for knowledge spillovers. Another refers to effective protection mechanisms for the outcome of intangible investment. A policy that primarily aims at increasing price competition in markets through competition policy measures may not be expected to positively affect innovation on a broad scale.
Rammer, Christian and Christian Köhler (2012), Innovationen, Anlageinvestitionen und immaterielle Investitionen, ZEW Discussion Paper No. 12-085, Mannheim, published in: Wirtschaftspolitische Blätter.