I argue that intangible assets promote agency conflicts between outside investors and inside specialists. Their opacity and specialized nature provide a microfoundation for why highly intangible firms underinvest despite great valuations and profitability---a challenge for standard theories....

We find that acquisitions exhibit less evidence of agency problems when the target possesses more intangible assets. Acquisitions of intangibles are associated with higher announcement returns, superior post-acquisition performance, and less free cash flow, mitigating empire-building concerns....

Intangible capital can be used to create new goods and services (product intangibles) or to improve the efficiency of the firm (process intangibles). We reveal and study a new empirical fact: Executive and skilled labor pay is increasing in firm process intensity (the fraction of intangibles...