Imported intangible capital and sectoral economic growth: Evidence from 42 economies

This paper investigates the impact of imported intangible capital on value added. While existing studies confirm the importance of intangible capital for growth, its distinct effects by source, imported versus domestic, remain underexplored. Using data from the World Input-Output Database for 2000–2014, we employ a two-way fixed effects model to estimate both long- and short-term impacts. The results show that intangible capital generally increases value added in the long run but reduces it in the short run due to adjustment costs before productivity gains are realised. Moreover, imported intangibles exert stronger negative short-term effects than domestic ones. However, this pattern reverses after the global financial crisis, suggesting that multinational firms are more resilient to shocks. These findings provide new insights into the role of intangible capital on economic growth and imply the need for institutional reform and financial support to minimise short-term adjustment costs. • The study analyses how imported intangible capital affects value added. • Intangible capital increases long-run growth but lowers short-run value-added. • Adjustment costs cause the short-run decline in value added before gains emerge. • Imported intangibles reduce growth more than domestic, this reverses after 2008. • Results suggest policy reform should ease short-run adjustment costs of intangibles.