Intangible resources, Tobin’s q, and sustainability of performance differences

This paper tests empirically the hypothesis that the greater the intangibility of a firm’s resources, the greater the sustainability of its competitive advantage. Resource intangibility is measured by: (1) Tobin’s q and (2) the predicted value from a hedonic regression of q on several accounting measures of intangibles. Sustainability is measured by the persistence of firm-specific profits. Using a dynamic panel data regression model, I find that intangibles play an effective role in sustaining a firm’s competitive advantage, as predicted by the resource-based view of the firm. However, the results suggest that intangibles can also lock firms into persistent disadvantages.