Intangible assets investment and firms’ performance: evidence from small and medium-sized enterprises in Korea

    Hyeon Sik Seo   Affiliation
    ; YoungJun Kim   Affiliation


While many studies have examined the relationship between investment in intangibles assets and performance in large corporations, current research is lacking in regard to intangible investments in small and medium enterprises (SMEs). This study looks at SMEs in which intangible investments would usually be minor because they tend to consider intangible investment as an inefficient cost and concentrate on investments in tangible assets. This paper aims to contribute to the current literature and suggests that investment in the intangible assets of (human capital, advertising, R&D) is essential for SMEs pursuing superior firm performance. Actual data collected from 173 SMEs in Korea were analyzed employing hierarchical regression methodology. Results indicate that all three intangible resources have a positive effect on a firm’s profitability and value. Interestingly, this research finds that investment in advertising has the most influential impact on a firm’s profitability and value. This study has implications for SMEs in achieving their profitability and value. The results in this study highlight that intangible investment is not a waste of money for SMEs, and that business managers could strategically utilize these three key contributors (human capital, advertising, R&D) and adopt investment in intangible assets to accomplish their managerial goals.

Keyword : intangible assets, human capital, advertising, research and development, firm performance, small and medium-sized enterprises

How to Cite
Seo, H. S. ., & Kim, Y. . (2020). Intangible assets investment and firms’ performance: evidence from small and medium-sized enterprises in Korea. Journal of Business Economics and Management, 21(2), 421-445.
Published in Issue
Mar 3, 2020
Abstract Views
PDF Downloads
Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.


Aaker, D. (1996). Building strong brands: Building, measuring, and managing brand equity. The Free Press.

Aaker, D. (2007). Innovation: Brand it or lose it. California Management Review, 50(1), 8–24.

Aaker, D. A. (2008). Spanning silos: The new CMO imperative. Harvard Business Press.

Ailawadi, K. L., Lehmann, D. R., & Neslin, S. A. (2003). Revenue premium as an outcome measure of brand equity. Journal of Marketing, 67(4), 1–17.

Akgün, A. E., Keskin, H., Byrne, J. C., & Aren, S. (2007). Emotional and learning capability and their impact on product innovativeness and firm performance. Technovation, 27(9), 501–513.

Akman, G., & Yilmaz, C. (2008). Innovative capability, innovation strategy and market orientation: an empirical analysis in Turkish software industry. International Journal of Innovation Management, 12(01), 69–111.

Andonova, V., & Ruíz-Pava, G. (2016). The role of industry factors and intangible assets in company performance in Colombia. Journal of Business Research, 69(10), 4377–4384.

Andras, T. L., & Srinivasan, S. S. (2003). Advertising intensity and R&D intensity: Differences across industries and their impact on firm’s performance. International Journal of Business and Economics, 2(2), 167.

Añón Higón, D., Gómez, J., & Vargas, P. (2017). Complementarities in innovation strategy: Do intangibles play a role in enhancing firm performance? Industrial and Corporate Change, 26(5), 865–886.

Arrighetti, A., Landini, F., & Lasagni, A. (2014). Intangible assets and firm heterogeneity: Evidence from Italy. Research Policy, 43(1), 202–213.

Bai, Y., Yuan, J., & Pan, J. (2016). Why SMEs in emerging economies are reluctant to provide employee training: Evidence from China. International Small Business Journal, 35(6), 751–766.

Barker III, V. L., & Mueller, G. C. (2002). CEO characteristics and firm R&D spending. Management Science, 48(6), 782–801.

Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99–120.

Barney, J. B., & Arikan, A. M. (2001). The resource-based view: Origins and implications. In The Blackwell handbook of strategic management (pp. 124–188). Blackwell Publishers.

Barney, J. B., & Hesterly, W. (2015). Strategic management and competitive advantage concepts and cases. Pearson.

Barney, J. B., & Wright, P. M. (1998). On becoming a strategic partner: The role of human resources in gaining competitive advantage. Human Resource Management, 37(1), 31–46.<31::AID-HRM4>3.0.CO;2-W

Bassi, L. J., Ludwig, J., McMurrer, D. P., & Van Buren, M. (2002). Profiting from learning: Firm-level effects of training investments and market implications. Singapore Management Review, 24(3), 61–76.

Becker, G. S. (1964). Human capita. Columbia University Press.

Bertrand, O. (2009). Effects of foreign acquisitions on R&D activity: Evidence from firm-level data for France. Research Policy, 38(6), 1021–1031.

Bharadwaj, A. S., Bharadwaj, S. G., & Konsynski, B. R. (1999). Information technology effects on firm performance as measured by Tobin’s q. Management Science, 45(7), 1008–1024.

Blundell, R., Dearden, L., Meghir, C., & Sianesi, B. (1999). Human capital investment: the returns from education and training to the individual, the firm and the economy. Fiscal Studies, 20(1), 1–23.

Bontis, N., & Fitz-Enz, J. (2002). Intellectual capital ROI: A causal map of human capital antecedents and consequents. Journal of Intellectual Capital, 3(3), 223–247.

Booltink, L. W., & Saka-Helmhout, A. (2017). The effects of R&D intensity and internationalization on the performance of non-high-tech SMEs. International Small Business Journal, 36(1), 81–103.

Bose, I., & Pal, R. (2012). Do green supply chain management initiatives impact stock prices of firms? Decision Support Systems, 52(3), 624–634.

Bresnahan, T. F., Brynjolfsson, E., & Hitt, L. M. (2002). Information technology, workplace organization, and the demand for skilled labor: Firm-level evidence. The Quarterly Journal of Economics, 117(1), 339–376.

Brockbank, W. (1999). If HR were really strategically proactive: Present and future directions in HR’s contribution to competitive advantage, Human Resource Management, 38(4), 337–352.<337::AID-HRM8>3.0.CO;2-5

Carmona, P., Momparler, A., & Gieure, C. (2012). The performance of entrepreneurial small‐and medium‐sized enterprises. The Service Industries Journal, 32(15), 2463–2487.

Chauvin, K. W., & Hirschey, M. (1993). Advertising, R&D expenditures and the market value of the firm. Financial Management, 22(4), 128–140.

Chen, C.-J., & Huang, J.-W. (2009). Strategic human resource practices and innovation performance – The mediating role of knowledge management capacity. Journal of Business Research, 62(1), 104– 114.

Chen, J., & Waters, G. (2017). Firm efficiency, advertising and profitability: Theory and evidence. The Quarterly Review of Economics and Finance, 63, 240–248.

Chen, Z., Zhang, J., & Zheng, W. (2017). Import and innovation: Evidence from Chinese firms. European Economic Review, 94, 205–220.

Chowdhury, S., Schulz, E., Milner, M., & Van De Voort, D. (2014). Core employee based human capital and revenue productivity in small firms: An empirical investigation. Journal of Business Research, 67(11), 2473–2479.

Coff, R. W. (2002). Human capital, shared expertise, and the likelihood of impasse in corporate acquisitions. Journal of Management, 28(1), 107–128.

Cohen, J. (1988). Statistical power analysis for the behavioral sciences (2nd ed.). Lawrence Earlbaum Associates.

Corrado, C., Haskel, J., Jona-Lasinio, C., & Iommi, M. (2016). Intangible investment in the EU and US before and since the Great Recession and its contribution to productivity growth (EIB Working Papers 2016/08). European Investment Bank (EIB).

Corrado, C., Hulten, C., & Sichel, D. (2005). Measuring capital and technology: An expanded framework. In Measuring capital in the new economy (pp. 11–46). University of Chicago Press.

Cozzarin, B. P., & Percival, J. C. (2006). Complementarities between organisational strategies and innovation. Economics of Innovation and New Technology, 15(3), 195–217.

Damanpour, F. (1991). Organizational innovation: A meta-analysis of effects of determinants and moderators. Academy of Management Journal, 34(3), 555–590.

Davcik, N. S., & Sharma, P. (2016). Marketing resources, performance, and competitive advantage: A review and future research directions. Journal of Business Research, 69(12), 5547–5552.

Day, G. S. (1994). The capabilities of market-driven organizations. The Journal of Marketing, 58(4), 37–52.

Del Valle, I. D., & Castillo, M. A. S. (2009). Human capital and sustainable competitive advantage: An analysis of the relationship between training and performance. International Entrepreneurship and Management Journal, 5(2), 139–163.

Dutta, S., Narasimhan, O., & Rajiv, S. (1999). Success in high-technology markets: Is marketing capability critical? Marketing Science, 18(4), 547–568.

Ehie, I. C., & Olibe, K. (2010). The effect of R&D investment on firm value: An examination of US manufacturing and service industries. International Journal of Production Economics, 128(1), 127– 135.

Ettlie, J. E. (1998). R&D and global manufacturing performance. Management Science, 44(1), 1–11.

Feng, H., Morgan, N. A., & Rego, L. L. (2017). Firm capabilities and growth: The moderating role of market conditions. Journal of the Academy of Marketing Science, 45(1), 76–92.

Fosfuri, A., & Giarratana, M. S. (2009). Masters of war: Rivals’ product innovation and new advertising in mature product markets. Management Science, 55(2), 181–191.

Franklin, D., & Marshall, R. (2019). Adding co-creation as an antecedent condition leading to trust in business-to-business relationships. Industrial Marketing Management, 77, 170–181.

Franko, L. G. (1989). Global corporate competition: Who’s winning, who’s losing, and the R&D factor as one reason why. Strategic Management Journal, 10(5), 449–474.

Gamayuni, R. R. (2015). The effect of intangible asset, financial performance and financial policies on the firm value. International Journal of Scientific & Technology Research, 4, 1–11.

Ghosh, D., & Lusch, R. F. (2000). Outcome effect, controllability and performance evaluation of managers: Some field evidence from multi-outlet businesses. Accounting, Organizations and Society, 25(4), 411–425.

Gogan, L. M., Artene, A., Sarca, I., & Draghici, A. (2016). The impact of intellectual capital on organizational performance. Procedia-Social and Behavioral Sciences, 221, 194–202.

Goodridge, P., Haskel, J., & Wallis, G. (2017). Spillovers from R&D and other intangible investment: Evidence from UK industries. Review of Income and Wealth, 63(s1), S22–S48.

Guan, J., & Ma, N. (2003). Innovative capability and export performance of Chinese firms. Technovation, 23(9), 737–747.

Gui-long, Z., Yi, Z., Kai-hua, C., & Jiang, Y. (2017). The impact of R&D intensity on firm performance in an emerging market: Evidence from China’s electronics manufacturing firms. Asian Journal of Technology Innovation, 25(1), 41–60.

Hall, R. (1993). A framework linking intangible resources and capabiliites to sustainable competitive advantage. Strategic Management Journal, 14(8), 607–618.

Hatch, N. W., & Dyer, J. H. (2004). Human capital and learning as a source of sustainable competitive advantage. Strategic Management Journal, 25(12), 1155–1178.

Hay, D., & Morris, D. (1979). Industrial economics: Theory and evidence. Oxford University Press.

Helfat, C. E., & Peteraf, M. A. (2003). The dynamic resource‐based view: Capability lifecycles. Strategic Management Journal, 24(10), 997–1010.

Hitt, M. A., Bierman, L., Shimizu, K., & Kochhar, R. (2001). Direct and moderating effects of human capital on strategy and performance in professional service firms: A resource-based perspective. Academy of Management Journal, 44(1), 13–28.

Ho, Y. K., Keh, H. T., & Ong, J. M. (2005). The effects of R&D and advertising on firm value: An examination of manufacturing and nonmanufacturing firms. IEEE Transactions on Engineering Management, 52(1), 3–14.

Hooley, G. J., Greenley, G. E., Cadogan, J. W., & Fahy, J. (2005). The performance impact of marketing resources. Journal of Business Research, 58(1), 18–27.

Hoskisson, R. E., Eden, L., Lau, C. M., & Wright, M. (2000). Strategy in emerging economies. Academy of Management Journal, 43(3), 249–267.

Hult, G. T. M., Hurley, R. F., & Knight, G. A. (2004). Innovativeness: Its antecedents and impact on business performance. Industrial Marketing Management, 33(5), 429–438.

Hunt, S. D., & Morgan, R. M. (1995). The comparative advantage theory of competition. The Journal of Marketing, 59(2), 1–15.

Jeng, D. J.-F., & Pak, A. (2016). The variable effects of dynamic capability by firm size: The interaction of innovation and marketing capabilities in competitive industries. International Entrepreneurship and Management Journal, 12(1), 115–130.

Joshi, A., & Hanssens, D. M. (2010). The direct and indirect effects of advertising spending on firm value. Journal of Marketing, 74(1), 20–33.

Keller, K. L. (1998). Strategic brand management: Building, measuring, and managing brand equity. New Jersey.

Kitching, J. (1998). Investing in training and small firm growth and survival: An empirical analysis for the UK 1987–97. International Small Business Journal, 17(1), 110–111.

Kotabe, M., Srinivasan, S. S., & Aulakh, P. S. (2002). Multinationality and firm performance: The moderating role of R&D and marketing capabilities. Journal of International Business Studies, 33, 79–97.

Kozlenkova, I. V., Samaha, S. A., & Palmatier, R. W. (2014). Resource-based theory in marketing. Journal of the Academy of Marketing Science, 42(1), 1–21.

Kramer, J.-P., Marinelli, E., Iammarino, S., & Diez, J. R. (2011). Intangible assets as drivers of innovation: Empirical evidence on multinational enterprises in German and UK regional systems of innovation. Technovation, 31(9), 447–458.

Krasnikov, A., & Jayachandran, S. (2008). The relative impact of marketing, research-and-development, and operations capabilities on firm performance. Journal of Marketing, 72(4), 1–11.

Laursen, K., & Foss, N. J. (2003). New human resource management practices, complementarities and the impact on innovation performance. Cambridge Journal of Economics, 27(2), 243–263.

Lawson, B., & Samson, D. (2001). Developing innovation capability in organisations: A dynamic capabilities approach. International Journal of Innovation Management, 5(03), 377–400.

Lee, X., Xie, N., & Pang, L. (2008, July). Empirical analysis of R&D capability in China’s automotive firms. Paper presented at the PICMET 2008. Portland International Conference on Management of Engineering & Technology.

Leonard‐Barton, D. (1992). Core capabilities and core rigidities: A paradox in managing new product development. Strategic Management Journal, 13(S1), 111–125.

Long, C. P., Bendersky, C., & Morrill, C. (2011). Fairness monitoring: Linking managerial controls and fairness judgments in organizations. Academy of Management Journal, 54(5), 1045–1068.

Lukas, B. A., & Bell, S. J. (2000). Strategic market position and R&D capability in global manufacturing industries: Implications for organizational learning and organizational memory. Industrial Marketing Management, 29(6), 565–574.

Lynch, L. M., & Black, S. E. (1998). Beyond the incidence of employer-provided training. ILR Review, 52(1), 64–81.

Mansfield, E. (1984). R&D and innovation: Some empirical findings R&D, patents, and productivity (pp. 127–154). University of Chicago Press.

Marlow, S., Patton, D., & Ram, M. (2004). Managing labour in small firms. Routledge.

McAlister, L., Srinivasan, R., & Kim, M. (2007). Advertising, research and development, and systematic risk of the firm. Journal of Marketing, 71(1), 35–48.

McKee, D. O., Conant, J. S., Varadarajan, P. R., & Mokwa, M. P. (1992). Success-producer and failurepreventer marketing skills: A social learning theory interpretation. Journal of the Academy of Marketing Science, 20(1), 17–26.

Miles, S. J., & Van Clieaf, M. (2017). Strategic fit: Key to growing enterprise value through organizational capital. Business Horizons, 60(1), 55–65.

Montresor, S., & Vezzani, A. (2016). Intangible investments and innovation propensity: Evidence from the Innobarometer 2013. Industry and Innovation, 23(4), 331–352.

Morgan, N. A. (2012). Marketing and business performance. Journal of the Academy of Marketing Science, 40(1), 102–119.

Motta, V. (2020). Lack of access to external finance and SME labor productivity: Does project quality matter? Small Business Economics, 54, 119–134.

Mumford, M. D. (2000). Managing creative people: Strategies and tactics for innovation. Human Resource Management Review, 10(3), 313–351.

OECD. (2011). A new OECD project. New sources of growth: Intangible assets.

Oriani, R., & Sobrero, M. (2008). Uncertainty and the market valuation of R&D within a real options logic. Strategic Management Journal, 29(4), 343–361.

Pauwels, K., Silva-Risso, J., Srinivasan, S., & Hanssens, D. M. (2004). New products, sales promotions, and firm value: The case of the automobile industry. Journal of Marketing, 68(4), 142–156.

Peterson, R. A., & Jeong, J. (2010). Exploring the impact of advertising and R&D expenditures on corporate brand value and firm-level financial performance. Journal of the Academy of Marketing Science, 38(6), 677–690.

Ployhart, R. E., Weekley, J. A., & Ramsey, J. (2009). The consequences of human resource stocks and flows: A longitudinal examination of unit service orientation and unit effectiveness. Academy of Management Journal, 52(5), 996–1015.

Porter, M. E. (1980). Competitive strategy: Technologies for analyzing industries and competitors. Free Press.

Quintana-García, C., & Benavides-Velasco, C. A. (2008). Innovative competence, exploration and exploitation: The influence of technological diversification. Research Policy, 37(3), 492–507.

Reuber, A. R., & Fischer, E. (1999). Understanding the consequences of founders’ experience. Journal of Small Business Management, 37(2), 30–45.

Riley, S. M., Michael, S. C., & Mahoney, J. T. (2017). Human capital matters: Market valuation of firm investments in training and the role of complementary assets. Strategic Management Journal, 38(9), 1895–1914.

Ruiqi, W., Wang, F., Xu, L., & Yuan, C. (2017). R&D expenditures, ultimate ownership and future performance: Evidence from China. Journal of Business Research, 71, 47–54.

Ruiz-Ortega, M. J., & García-Villaverde, P. M. (2008). Capabilities and competitive tactics influences on performance: Implications of the moment of entry. Journal of Business Research, 61(4), 332–345.

Saridakis, G., Lai, Y., & Cooper, C. L. (2017). Exploring the relationship between HRM and firm performance: A meta-analysis of longitudinal studies. Human Resource Management Review, 27(1), 87–96.

Saunila, M., & Ukko, J. (2014). Intangible aspects of innovation capability in SMEs: Impacts of size and industry. Journal of Engineering and Technology Management, 33, 32–46.

Scherer, F. (1984). Innovation and growth: Schumpeterian perspectives. MIT Press.

Sher, P. J., & Yang, P. Y. (2005). The effects of innovative capabilities and R&D clustering on firm performance: The evidence of Taiwan’s semiconductor industry. Technovation, 25(1), 33–43.

Sherman, R., & Hoffer, G. (1971). Does automobile style change payoff? Applied Economics, 3(3), 153– 165.

Shin, N., Kraemer, K. L., & Dedrick, J. (2017). R&D and firm performance in the semiconductor industry. Industry and Innovation, 24(3), 280–297.

Smith, D. J., Gradojevic, N., & Irwin, W. S. (2011). An analysis of brand equity determinants: Gross profit, advertising, research, and development. Journal of Business & Economics Research (JBER), 5(11). 103–116.

Song, M., Di Benedetto, C. A., & Nason, R. W. (2007). Capabilities and financial performance: The moderating effect of strategic type. Journal of the Academy of Marketing Science, 35(1), 18–34.

Song, M., Droge, C., Hanvanich, S., & Calantone, R. (2005). Marketing and technology resource complementarity: An analysis of their interaction effect in two environmental contexts. Strategic Management Journal, 26(3), 259–276.

Srinivasan, S., Pauwels, K., Silva-Risso, J., & Hanssens, D. M. (2009). Product innovations, advertising, and stock returns. Journal of Marketing, 73(1), 24–43.

Srivastava, R. K., & Shocker, A. D. (1991). Brand equity: A perspective on its meaning and measurement. Marketing Science Institute.

Subramaniam, M., & Youndt, M. A. (2005). The influence of intellectual capital on the types of innovative capabilities. Academy of Management Journal, 48(3), 450–463.

Teece, D. J. (1982). Towards an economic theory of the multiproduct firm. Journal of Economic Behavior & Organization, 3(1), 39–63.

Teece, D. J. (2007). Explicating dynamic capabilities: The nature and microfoundations of (sustainable) enterprise performance. Strategic Management Journal, 28(13), 1319–1350.

Thornhill, S., & Whilte, R. (2007). Strategic purity: A multi‐industry evaluation of pure vs. hybrid business strategies. Strategic Management Journal, 28(5), 553–561.

Torraco, R. J., & Swanson, R. A. (1995). The strategic roles of human resource development. People and Strategy, 18(4), 10–21.

Tseng, M.-L. (2010). An assessment of cause and effect decision-making model for firm environmental knowledge management capacities in uncertainty. Environmental Monitoring and Assessment, 161(1), 549–564.

Unger, J. M., Rauch, A., Frese, M., & Rosenbusch, N. (2011). Human capital and entrepreneurial success: A meta-analytical review. Journal of Business Venturing, 26(3), 341–358.

Van Ark, B., Hao, J. X., Corrado, C., & Hulten, C. (2009). Measuring intangible capital and its contribution to economic growth in Europe. EIB Papers, 14(1), 62–93.

Vorhies, D. W., & Morgan, N. A. (2003). A configuration theory assessment of marketing organization fit with business strategy and its relationship with marketing performance. Journal of Marketing, 67(1), 100–115.

Vorhies, D. W., Morgan, R. E., & Autry, C. W. (2009). Product‐market strategy and the marketing capabilities of the firm: Impact on market effectiveness and cash flow performance. Strategic Management Journal, 30(12), 1310–1334.

Wang, F., Zhang, X.-P. S., & Ouyang, M. (2009). Does advertising create sustained firm value? The capitalization of brand intangible. Journal of the Academy of Marketing Science, 37(2), 130–143.

Wang, H.-M. D., & Sengupta, S. (2016). Stakeholder relationships, brand equity, firm performance: A resource-based perspective. Journal of Business Research, 69(12), 5561–5568.

Wang, Y., Du, R., Koong, K. S., & Fan, W. (2017). Effects of R&D policy choice on accounting performance and market value. R&D Management, 47(4), 545–556.

Webster, E. (2000). The growth of enterprise intangible investment in Australia. Information Economics and Policy, 12(1), 1–25.

Weerawardena, J. (2003). The role of marketing capability in innovation-based competitive strategy. Journal of Strategic Marketing, 11(1), 15–35.

Yam, R. C., Guan, J. C., Pun, K. F., & Tang, E. P. (2004). An audit of technological innovation capabilities in Chinese firms: Some empirical findings in Beijing, China. Research Policy, 33(8), 1123–1140.

Yin Wong, H., & Merrilees, B. (2008). The performance benefits of being brand-orientated. Journal of Product & Brand Management, 17(6), 372–383.

Yu, W., Ramanathan, R., & Nath, P. (2014). The impacts of marketing and operations capabilities on financial performance in the UK retail sector: A resource-based perspective. Industrial Marketing Management, 43(1), 25–31.

Zhang, Y., & Liu, D. (2010, May). Public R&D Subsidies, Firm innovation and firm performance – Empirical evidence from listed companies in China’s SME board. Paper presented at the Proceedings of the 2010 International Conference on E-Business and E-Government. Guangzhou, China.