Technological Innovation, Intangible Capital, and Asset Prices

We review research on the asset pricing implications of models with innovation and intangible capital. In these models, technological innovation shocks propagate differently than standard total factor productivity shocks—and therefore have qualitatively distinct asset pricing implications. We discuss recent approaches to measuring intangible capital and innovation, many of which rely on the prices of financial securities. Last, we review models that explore the economic differences between intangible and innovation relative to other forms of investments—focusing on the role of human capital and cash-flow appropriability.