Investigating the effect of intangible capital components on market value in Borsa Istanbul firms

The purpose of this research is to determine the relationship between market value and the four main components of intangible capital, which are R&D, patents, patent citations, and advertising. For this purpose, the hedonic market value approach was followed and a sample of 167 manufacturing firms constantly traded on the Borsa Istanbul from 2006 to the end of 2020 was preferred. Due to endogeneity concerns in the model, the System GMM estimator was applied. The findings reveal that all intangible capital components have different levels of positive market value with the exception of patent citations. The results indicate that patent citations have a moderately negative effect on market value, contrary to previous studies. In addition, a secondary analysis of the hedonic market model was conducted to determine the long-run value of intangible capital using nonlinear combinations of parameter estimates. Consequently, as the long-term market value of R&D, patents, and advertising increases, the negative effect of patent citation becomes insignificant. While patents boost the R&D-based innovation process, patent citations interrupt the value-creation cycle in the Turkish manufacturing industry. In other words, the Turkish manufacturing industry is unable to transfer knowledge from R&D into a competitive advantage appropriately. This study contributes to the existing literature on how to value intangible capital in the Turkish manufacturing industry.