Investing in Customer Capital

Firms invest heavily in customer capital; such investment is a main source of intangible capital value. Customer capital investment is measured using sales and marketing expense from income statements, salaries paid to workers in sales and marketing, and text from SEC filings. There is large and persistent variation across industries in customer capital investment; industries investing the most are growing as a share of aggregate enterprise value. Variation in sales and marketing expense explains a large amount of industry-level variation in intangible capital value. Industries characterized by information frictions and network effects in demand invest most heavily in cus-tomer capital.