Do intangible investments affect companies’ productivity performance? * MARY O’MAHONY AND MICHELA VECCHI National Institute of Economic and Social Research, London. 2 Dean Trench Street, Smith Square London SW1P 3HE Tel: 020-76541918 Fax: 020-76541900 Email: m.omahony@niesr.ac.uk, mvecchi@niesr.ac.uk Abstract Using company accounts data for 5 countries (US, UK, Japan, France and Germany) we analyse the relationship between intangibles and productivity. We integrate the company data with industry information on tangible and intangible investments and skill composition of the labour force. The industry data are summarised in two different taxonomies, factor and skill intensive groups, obtained using cluster analysis. These are included in the econometric specification in the form of shift and interactive dummies. The results provide evidence of higher productivity in R&D intensive industries. This can be interpreted as evidence in favour of the presence of spillover effects. * We gratefully acknowledge the ESRC grant no. R00223256 and the EU Fifth Framework grant no. HPSE-CT-2001. We wish to thank the participants in the 2002 NIE Conference, the 2002 EEA Congress, the 2002 EARIE conference and our colleagues at NIESR , particularly Martin Weale, for their comments. We also thank Bob Hart, Mark Rogers and Ian Marsh for suggestions to improve the paper. Any mistakes are the authors’ sole responsibility.