Portfolio of Intangible Investments and Production and Innovation Performance: Evidence from Taiwanese Manufacturing Firms*

In the face of keen competition, what is the optimal investment strategy for enhancing a firm's core competency? Which types of intangible investments should be encouraged? What are the effects of intangible investments on innovation performance? Intangible assets have long been recognized as important sources of firms' innovation and long-term growth. In a departure from the approach of traditional studies on intangible investments that mainly focus on the R&D input, in this study we explore the performance implications of non-R&D investments. Using uniquely compiled firm-level panel data of Taiwanese manufacturing firms for the years 2001, 2006 and 2011, we find that intangible investments positively contribute to firms' production and innovation performance. Among three categories of intangible investments, the empirical results show that economic competency contributes the most to the growth in the value of firms' output, and innovative property is the main driver facilitating the development of product innovation. Policy and managerial implications are also developed and investigated.