Publications / Policy Memo

Investment Heroes 2018: Encouraging and Diffusing Innovation Throughout the Economy

By and / 2.6.2019

Despite the low unemployment rate, productivity growth is still stuck in slow gear. Non-farm business output per hour increased by 1.3 percent from the third quarter of 2017 to the third quarter of 2018 – well below the post- war average of 2.2 percent.1 Other countries around the world are also grappling with this slowdown in productivity growth.2 Productivity growth is the primary factor in boosting wages and living standards.

The continued lack of productivity growth arises from several causes. One important issue is a growth shortfall in the amount of capital relative to the amount of labor, where capital represents investment in equipment, structures, software, and other intellectual property.

The Bureau of Labor Statistics (BLS) calculates a measure it calls “capital intensity,” which measures the services produced by capital assets relative to the number of labor hours worked in the non-farm business sector. As shown in Figure 1, capital intensity has grown much more slowly over the past 10 years than in previous 10-year periods.

There has been much debate over the reasons for this shortfall. Some have suggested that corporate managers and stock market investors have become myopic and too focused on short-run returns. Others blame excessive regulation.

But, no matter the reason for the investment shortfall, we think it’s important to identify those companies that are bucking the trend. Starting with our 2012 “Investment Heroes” report, and continuing through this report, we have focused on identifying those companies making the largest capital investments in the United States. By expanding the capital stock, these companies are helping boost productivity and wages, and creating new jobs.

The Progressive Policy Institute’s (PPI) Investment Heroes report provides an exclusive estimate of domestic capital spending for major U.S. companies. Currently, accounting rules do not require companies to report their U.S. capital spending separately. To fill this gap in the data, we created a methodology using publicly-available financial statements from non-financial Fortune 150 companies to identify the top companies that were investing in the United States. That methodology, with small modifications, has been used in each year’s report since the first in 2012.

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