FIGURE 13 Tangible and Intangible Assets.

SOURCE: Brynjohlsson and Yang, “Intangible Costs and Benefits of Computer Investments: Evidence from the Financial Markets.”

cult to measure, even though enormously important to the success of modern businesses.

The Value of Organizational Capital

He showed a final chart summarizing an attempt to measure the computer capital of a series of firms and come up with an organizational capital metric. Dr. Brynjolfsson’s group sent a survey to about 500 human resource managers and asked them how they organized production. They distilled the results into a single dimension of organizational capital. They found that organizational capital and computer capital were correlated with each other, but most strikingly, investors rewarded firms that ranked high in both computer capital and organizational capital. Dr. Brynjolfsson judged that it must be fairly difficult to bring these two into high equilibrium, or else the returns would be beaten down.

He summarized by saying that the Internet is transforming the way markets function and that the successful Web businesses of today are just the first wave of this transformation. Secondly, the Internet is transforming firms themselves. He repeated the finding that technology is just the tip of the iceberg in that transformation. It is a very important tip—arguably the catalyst that enables it all—but it is not where most of the time, effort, and investment go. Most of the investment goes into the intangible costs that change the way firms organize themselves.

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