organizational improvements and new business models (organizational capital) – and an additional-toCHS sub-category most important for businesses behind the global technological frontier, namely spending on collaboration-related assets to diffuse existing but new-to-the-firm technologies and adapt them to local context, such as outlays on networking and peer-to-peer learning from local clusters and global value chains, foreign buyers and sellers, consultants and study tours, and other forms learning through global networks (collaboration capital).

The acceleration of globalization, technological progress, and increased trade and competition have resulted in rents from new ideas becoming more important for sustained firm-level competitiveness and aggregate growth across countries (Canuto, Dutz and Reis, 2011). In addition, as countries accumulate larger stocks of human capital, the production and use of knowledge capital is both enabled and complemented. The increasing importance of knowledge capital over time is shown by the steady increase in the intangible investment rate in the US as a share of expanded nonfarm business output, from 8 percent in 1977 to 14 percent in 2010, in contrast with a secular decline in the tangible investment rate (Corrado and Hulten 2010, Hulten 2013).

A recent international empirical literature has highlighted investment in intangible assets both as a distinct category of firm investment and as a major driver of growth. In the US and the UK, firms now invest more in intangible than physical capital. Estimates of knowledge capital at the aggregate level across countries—to-date available for high-income OECD countries, Brazil, China and India—highlight that intangibles are an important and dynamic element of aggregate economic growth, with a significant positive correlation between investments in “core” knowledge capital (excluding software and architectural and engineering designs to control for the links with IT equipment investment and real estate bubbles) and PPP-adjusted output per capita (Hulten 2013). Applying this economy-wide methodology to Brazil, Dutz et al. (2012) estimate that during 2000-2008, annual business spending on intangibles averaged about 4 percent of GDP, showing that this investment is positively correlated with recent export growth and total factor productivity estimates across manufacturing industries. Hulten and Hao (2012) estimate China’s aggregate intangible expenditures at roughly 7.5 percent of GDP.

Measurement of investment in intangibles at the firm level is at an early stage for several reasons, though mainly because most national industrial surveys have not historically included the distinct questions needed to quantify investment in intangibles. This shortcoming of existing methods is being gradually addressed, but so far only for high-income countries: Haltiwanger, Haskel and Robb (2009) discuss new surveys piloted in the UK (as reported in Awano et al. 2010a, b) and in the US (based on new questions on spending on intangible assets by young firms added in the longitudinal Kauffman Firm Survey). They conclude that R&D is but one measure of knowledge investment: a range of additional questions are essential to fully capture knowledge spending, with complementary questions on depreciation rates of intangible assets yielding helpful insights.

The present study takes an initial step in measuring and quantifying the association between public and private investments in knowledge capital and industry-level and firm-level sales outcomes. It is the first study to take a close look at how knowledge capital works in a specific industry, where institutional details matter. In this paper, we empirically examine the linkages between intangible investments and industry- and firm-level exports in the Chilean wine industry. The study tests two hypotheses: (i) that 3