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This paper studies how organizational assets, R&D, and patents affect the market valuation of Finnish firms. The occupational information from Finnish linked employer-employee data is used to form estimates of firms' organizational investments. These estimates are accompanied by data on firms' R&D investments, patent applications, and patent citations. A non-linear least squares regression and a panel regression are run to investigate their contribution to the market valuation of Finnish firms during the period 1995-2008. The results indicate that organizational capital, R&D, patent citations and, to some extent, the patent stock have a positive and significant effect on the market value. Furthermore, the results show that the omission of organizational activities leads to significant downward bias in the importance of R&D and patent activities.

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This paper relies on register-based statistical data from Finland to measure broad research and development (R&D), organizational capital (OC) and information and communication technology (ICT) investments as innovation inputs in addition to formal survey-based R&D and CIS survey data on innovations. The linked panel data are appropriate for a comparison of low-market-share (small) and large-market-share (large) firms. We analyze the productivity growth and profitability of Finnish firms with varying market power. In contrast to high-market-share firms, low-market-share firms are characterized by low profit derived from new innovations. This study suggests that in addition to imitative growth, a 'negative selection mechanism' explains the high productivity growth relative to the low profits.

The prior literature has established that the internationalization of corporate R&D is motivated by access to new markets and technological knowledge. However, the empirical literature has overlooked whether the market and technological characteristics of R&D host countries influence the firm-level productivity gains from international R&D. This study empirically examines whether international R&D activities affect the productivity of European multinational firms. Estimating an R&D augmented production function shows that the output elasticity of R&D depends positively on the share of international R&D activities. The analysis further shows that the improvements are associated only with offshore R&D in host countries that have experienced fast economic growth or that are technologically stronger than firms' home country.