Firm market value and production technology

This paper estimates the production technology of the U.S. computer industry using firm market value to control for the correlation between inputs and unobservable productivity shocks. We show that firm market value can serve as a proxy for unobservable productivity shocks. We also show that firm market value is robust as a proxy when firm faces uncertainties and capital market imperfections. Empirical results suggest that our firm market value proxy works well for the computer industry.