Examining the Relationship between “Knowledge-Based Capital” and “Output per worker” in Iran’s Manufacturing Sector

Heydari, Narges; Najarzadeh, Reza; Heydari, Hassan; Yavari, Kazem

doi:10.22059/ier.2025.349590.1007554

Examining the Relationship between “Knowledge-Based Capital” and “Output per worker” in Iran’s Manufacturing Sector

Document Type : Research Paper

Authors

Narges Heydari ¹

Reza Najarzadeh ¹

Hassan Heydari ¹

Kazem Yavari ²

¹ Faculty of Management and Economics, Tarbiat Modares University, Tehran, Iran.

² Department of Economics, Yazd University, Yazd, Iran.

10.22059/ier.2025.349590.1007554

Abstract

Researches show that knowledge-based capital (KBC) plays a significant role in modern economies, with this non-tangible type of capital being the greatest form of business investment and a major contributor to economic growth in advanced economies. Despite its importance as an important driver of economic growth, there are not enough researches that focus on the role of KBC in developing countries, so this paper aims to examine the relationship between KBC and Output per worker in Iran’s manufacturing sector. To achieve this, we utilized a two-step estimation method; in the first step, we estimated KBC as a latent variable in the Iranian manufacturing sector using exploratory factor analysis. In the second step, we examined the relationship between KBC and Output per worker in Iran’s manufacturing sector using a panel data regression analysis. Our findings indicate that KBC plays no significant role in Iran’s manufacturing sector. A probable explanation of lower level of complexity in manufacturing sector of Iran is that the sector is not enough developed to need such factors to produce innovative and knowledge-based products, so, the knowledge-based capital has not a significant role in that. In another words, the manufacturing sector in Iran is yet equipment based and more relies on primary materials rather than high level knowledge-based factors.

Keywords

Exploratory Factor Analysis

Knowledge-Based Capital (KBC)

Manufacturing Industries

Output

Subjects

Microeconomics

Aghion, P., & Howitt, P. (1992). A Model of Growth through Creative Destruction. Econometrica, 60(2), 323-351. Retrieved from https://www.nber.org/system/files/working_papers/w3223/w3223.pdf

Abdih, Y., & Joutz, F. (2006). Relating the Knowledge Production Function to Total Factor Productivity: An Endogenous Growth Puzzle. IMF Staff Papers, 53(2), 242-271. Retrieved from https://www.jstor.org/stable/pdf/30036013.pdf

Corrado, C., Hulten, C., & Sichel, D. (2009). Intangible Capital and US Economic Growth. Review of income and wealth, 55(3), 661-685. Retrieved from https://onlinelibrary.wiley.com/doi/pdf/10.1111%2Fj.1475-4991.2009.00343.x

Corrado, C., Haskel, J., & Jona‐Lasinio, C. (2017). Knowledge Spillovers, ICT and Productivity Growth. Oxford Bulletin of Economics and Statistics, 79(4), 592-618. Retrieved from https://onlinelibrary.wiley.com/doi/full/10.1111/obes.12171

Chahal, H., & Bakshi, P. (2016). Measurement of Intellectual Capital in the Indian Banking Sector. Vikalpa, 41(1), 61-73. Retrieved from https://journals.sagepub.com/doi/pdf/10.1177/0256090916629253

Corrado, C. jona lasinio, C., & Iommi, M. (2014). Intangibles and industry productivity growth: Evidence from the EU. IARIW 33^rd General Conference, Rotterdam, Netherlands, August 24-30, 2014, Session 4A. Retrieved from http://old.iariw.org/papers/2014/LasinioPaper.pdf

Crass, D., & Peters, B. (2014). Intangible Assets and Firm-Level Productivity. ZEW-Centre for European Economic Research Discussion Paper, (14-120). Retrieved from https://papers.ssrn.com/sol3/Delivery.cfm?abstractid=2562302

Corrado, C., Hulten, C., & Sichel, D. (2005). Measuring Capital and Technology: An Expanded Framework. In Measuring Capital in the New Economy (11-46). Chicago: University of Chicago Press. Retrieved from https://www.nber.org/system/files/chapters/c0202/c0202.pdf

Chen, J. R., & Yang, C. H. (2005). Technological Knowledge, Spillover and Productivity: Evidence from Taiwanese Firm Level Panel Data. Applied Economics, 37(20), 2361-2371. Retrieved from https://www.tandfonline.com/doi/abs/10.1080/00036840500309262

Di Ubaldo, M., & Siedschlag, I. (2021). Investment in Knowledge‐Based Capital and Productivity: Firm‐Level Evidence from a Small Open Economy. Review of Income and Wealth, 67(2), 363-393. Retrieved from https://onlinelibrary.wiley.com/doi/pdfdirect/10.1111/roiw.12464

Ewens, M., Peters, R. H., & Wang, S. (2025). Measuring Intangible Capital with Market Prices. Management Science, 71(1), 407-427. Retrieved from https://www.nber.org/system/files/working_papers/w25960/w25960.pdf

Haskel, J., & Westlake, S. (2017). Capitalism without Capital: The Rise of the Intangible Economy. Princeton: Princeton University Press. Retrieved from https://hrcak.srce.hr/ojs/index.php/pse/article/download/10443/5540/36662

Lasinio, C. J., Manzocchi, S., & Meliciani, V. (2019). Knowledge Based Capital and Value Creation in Global Supply Chains. Technological Forecasting and Social Change, 148, 119709. Retrieved from https://iris.luiss.it/bitstream/11385/190919/1/Jona%20Manzocchi%20Meliciani_TFS_Proofs.pdf

Marrocu, E., Paci, R., & Pontis, M. (2012). Intangible Capital and Firms’ Productivity. Industrial and Corporate Change, 21(2), 377-402. Retrieved from https://www.econstor.eu/bitstream/10419/118895/1/ERSA2010_0496.pdf

Medda, G., & Piga, C. A. (2014). Technological Spillovers and Productivity in Italian Manufacturing Firms. Journal of Productivity Analysis, 41(3), 419-434. Retrieved from https://core.ac.uk/download/pdf/6928598.pdf

OECD (2013). Supporting Investment in Knowledge Capital: Growth and Innovation. Retrieved from https://www.oecd.org/en/publications/supporting-investment-in-knowledge-capital-growth-and-innovation_9789264193307-en.html

Olley, G. S., & Pakes, A. (1996). The Dynamics of Productivity in the Telecommunications Equipment Industry. Econometrica, 64(6), 1263–1297. Retrieved from https://www.nber.org/system/files/working_papers/w3977/w3977.pdf

Phale, K., Li, F., Adjei Mensah, I., Omari-Sasu, A. Y., & Musah, M. (2021). Knowledge-based Economy Capacity Building for Developing Countries: A Panel Analysis in Southern African Development Community. Sustainability, 13(5), 2890. Retrieved from https://www.mdpi.com/2071-1050/13/5/2890

Riley, R., Robinson, C., & Davison, S. (2011). Skills and Economic Performance: The Impact of Intangible Assets on UK Productivity. Evidence Report, 39. Retrieved from https://www.voced.edu.au/content/ngv:53179

Roth, F. (2019). Intangible Capital and Labour Productivity Growth: A Review of the Literature. Hamburg Discussion Papers in International Economics, 4. Retrieved from https://www.econstor.eu/bitstream/10419/207163/1/hdpie-no04.pdf

Romer, D. (2012). Advanced Macroeconomics (4^th Ed.). The McGraw-Hill Series in Economics. Retrieved from https://www.choolsgroup.com/Best-Books/Book%20Boon%20Books/Economics%20&%20Finance/Advanced%20Macroeconomics.pdf

Seidl, T. (2023). Investing in the Knowledge Economy: The Comparative Political Economy of Public Investments in Knowledge-Based Capital. European Journal of Political Research, 62(3), 924-944. Retrieved from https://ejpr.onlinelibrary.wiley.com/doi/pdfdirect/10.1111/1475-6765.12546

Stiglitz, J., & Greenwald, B. (2014). Creating a Learning Society: A New Approach to Growth, Development, and Social Progress. New York: Columbia University Press. Retrieved from https://business.columbia.edu/sites/default/files-efs/imce-uploads/Joseph_Stiglitz/December%2018%2C%20Buenos%20Aires%20RIDGE%20.pdf

Thelen, K. (2019). Transitions to the Knowledge Economy in Germany, Sweden, and the Netherlands. Comparative Politics, 51(2), 295– 315. Retrieved from https://www.jstor.org/stable/pdf/26563460.pdf

Umoh, O. J., & Effiong, E. L. (2013). Trade Openness and Manufacturing Sector Performance in Nigeria. Margin: The Journal of Applied Economic Research, 7(2), 147-169. Retrieved from https://journals.sagepub.com/doi/pdf/10.1177/0973801013483505

Van Ark, B., Hao, J. X., Corrado, C., & Hulten, C. (2009). Measuring intangible capital and its contribution to economic growth in Europe. EIB papers, 14(1), 62-93. Retrieved from https://www.econstor.eu/bitstream/10419/44905/1/618780114.pdf

Wong, S. A. (2009). Productivity and Trade Openness in Ecuador's Manufacturing Industries. Journal of Business Research, 62(9), 868-875. Retrieved from https://www.academia.edu/download/90094070/49933.pdf