The Impact of Organizational Capital on Cost Stickiness: Evidence from Japanese Firms

This study examined the impact of organizational capital (OC) on the cost stickiness of Japanese firms and analyzed whether this effect varies with the magnitude of sales changes. Using 12,727 firm-year observations from Tokyo Stock Exchange-listed firms between 2007 and 2024, we estimated the economic value of OC by capitalizing and amortizing selling, general, and administrative (SG&A) expenses, then classified firms into high- and low-OC groups based on the median. Cost stickiness was then compared across groups using the basic, ABJ, and extended models, with robustness checks based on adjusted OC and two-way fixed effects models. The results indicate that high-OC firms exhibit stronger cost stickiness, while low-OC firms display weaker or insignificant stickiness. The effect depends on the magnitude of sales fluctuations: stickiness is pronounced under small changes but diminishes or disappears under larger shocks. Overall, this study contributes by highlighting the role of organizational resources in shaping asymmetric cost behavior, extending explanations beyond adjustment costs or managerial incentives, and providing novel evidence from Japan, where firms generally exhibit cost stickiness regardless of OC level, reflecting institutional and cultural contexts.