Complementary Innovations and the Value of Intangible Assets

We build a general equilibrium model where growth is driven by new ideas that can have varying degrees of complementarity with previous innovations. The model links micro-level complementarities with the aggregate value of intangible capital and provides a new mapping between measures of knowledge accumulation found in patent data and aggregate TFP growth. We show how to measure the degree of complementarity and the rate of creative destruction from patent citation data. Our calibrations suggest that inter-invention complementarities contribute 50-70 percent to the aggregate value of intangible assets. Complementarities have a big impact on intangible capital valuation, because they greatly extend the economic life span of ideas by making the rate of creative destruction much lower than it would otherwise be.