Professional Documents
Culture Documents
Intellectual Capital
Intellectual capital covers both the human capital and the structural capital putting them
together for more rapid growth. The company value depends on and includes the entire worth of
individuals together with company structure. In fact, as Davenport, et al (1996) stated, “intellectual
capital increases company values and makes business operation more efficient”. In addition,
Bucklew (1991) believed that the sharing of competencies requires management of information.
Information Management and Intellectual Capital (IC) are related. Intellectual Capital involves
human resources, information technology, business strategy and the participation of employees
in order to transfer rapidly necessary experiences in the company. It is energizing and charging
both the national and international operation. To get people to share competencies in the
organization, management must facilitate exchange of knowledge among employees. (Bucklew,
1991) The organization ought to inform the members of available information, make
communication and intelligence accessible, and to train everyone to use the information and
whichever supporting technology the firm may have. (Hunter, 2002)
Most business managers and investors are familiar with tangible assets (current assets,
fixed assets, investments) in business valuation and management, but are uncomfortable dealing
with intangible assets. Yet, most market studies have estimated the value of intangible assets are
typically around three or four times a company’s tangible asset value as determined by traditional
accounting methods. For knowledge based companies, the value of the company’s intangible
assets frequently far outweighs the value of its tangible assets. Intellectual capital concepts lie at
the heart of valuing and managing intangible assets - and therefore at the heart of a company’s
ability to create additional future value.
The strength of using intellectual capital as the basis for valuation lies in the fact that the
valuation methodology will apply equally well to companies, to non-profit organizations and even
to government departments or branches.
This common valuation base opens up many possibilities, including the potential to
establish global common trading markets with a standardized reporting system - based on
intellectual capital values.
‘‘Tracking intellectual capital is a way for the company not just to find and put to use its hidden
assets but also to reconnect with its people. The changing competitive environment has forced
every company to shred the social contract it had with its employees. And in the process, many
firms have lost track of the real value of their "human capital". IC measurement will be a regular
reminder.’’
-- Gordon Petrash, Dow Chemical