05 Mar 2015
In the twentieth century, firms were predominantly capital-intensive and competed on cost efficiency. Companies with the most efficient factories could outcompete their rivals and become market leaders.
The twenty-first century firm is different. Competitive success now depends increasingly on product quality and innovation. These in turn hinge on a company’s intangible assets, such as its human capital and R&D capabilities. But unlike a factory, which is easily visible to investors, the fruits of intangible investment take several years to appear.
By Alex Edmans, Professor of Finance, London Business School.
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