What is growth accounting?
Short Answer
Growth accounting is a framework that decomposes economic or business output growth into contributions from labour, capital, and productivity (TFP).
Full Explanation
Growth accounting, pioneered by Robert Solow in 1957, breaks down output growth into its component drivers. At the macroeconomic level, it explains GDP growth through changes in labour hours, capital stock, and total factor productivity. At the firm level, the same framework decomposes revenue or GVA growth into the contributions from hiring (labour), investment (capital), and everything else (TFP). The 'everything else' is where intangible assets live — technology improvements, brand building, process optimisation, and knowledge accumulation. Modern growth accounting frameworks like EU KLEMS further decompose capital into tangible (machinery, buildings) and intangible (software, R&D, brand) components, making the contribution of intangible investment visible. Opagio applies this methodology at the individual company level, giving founders and investors quantitative evidence of how their intangible investments translate into growth.
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