Enterprise Value and the Value of Data

Report by Dan Ciuriak: “Data is widely acknowledged as the essential capital asset of the modern economy, yet its value remains largely invisible in corporate balance sheets and understated in national economic accounts. This paper argues that conventional valuation approaches — particularly those based on the costs of datafication — capture only part of the story. While expenditures on datafication
enter GDP as investment in intangible assets, they do not reflect the substantial economic rents
generated by the effective use of data within firms. These rents arise from data’s distinctive economic characteristics, including non-rivalry and combinatorial scalability, and its role in creating information asymmetries that give data-rich firms a competitive advantage. As a result, data contributes to enterprise value not through direct transactions, but by enhancing profitability, accelerating innovation through machine learning, and enabling the creation of machine knowledge capital.
Drawing on trends in the US economy, the paper estimates that data rents alone account for more
than two percent of GDP — representing a layer of value in addition to the investment flows currently captured in GDP. This has profound implications for national accounting methodologies, which
underestimate the value contribution of data. It also flags risks for economic policy in small open
economies that lack the scale to effectively capture data rents, since investing in datafication at less than critical scale may not recover costs and may result in negative productivity outcomes…(More)”.