This paper explores the empirical observation of the rising intangible-to-tangible ratio since 1990, then its stagnation in the past decade accounting for intangible heterogeneities. I propose that not only firms’ transferable assets (R&D, productivity) but also embedded intangible assets, such as brand value and organizational capital, influence business dynamics.

In December 2017, the United States Congress passed the Tax Cut and Jobs Act (TCJA), significantly reducing the corporate tax rate and introducing favorable policies for intangible assets. This paper aims to investigate the impact of the TCJA on various aspects of corporate behavior, including investments in intangibles, research and development (R&D) spending, and sales, general, and administrative (SG&A) expenses.

In this research, I investigate what caused the intangible over tangible ratio to increase. One explanation for the surge in intangible assets is the increase driven by globalization and skill-biased task specialization. Globalization has expanded market size and intensified competition, making the marginal cost advantage more significant through intangibles.