Capturing value in GVCs through intangible assets: The role of the trade-investment-intellectual property nexus

Intangible capital, a broad category of knowledge-based assets lacking physical embodiment, is a key determinant of value capture in global value chains (GVCs). In this paper, we study how policies that govern the trade-investment-intellectual property nexus help countries to increase returns to intangible assets. Using inter-country input-output tables combined with data on factor income, we estimate returns to measured intangible capital (i.e., intangible assets reported in national accounts) and 'unmeasured' intangible capital (captured as a residual) in GVCs for a large number of countries and industries over the period 2005-2015. We use these data in an econometric analysis to examine policy determinants, focusing on the package of disciplines on trade, investment, and intellectual property that are increasingly used by countries in their trade agreements. We find that trade and investment openness, intellectual property protection, and competition enforcement are positively associated with returns to intangible assets measured in national accounts. The relationship with unmeasured intangible capital is more complex regarding intellectual property protection and competition enforcement. Our discussion highlights the importance of striking a balance between the different elements of the nexus in order to maximize a country's potential to benefit from the growing role of intangibles in GVCs.