The hidden value of any company
Extracted from: Maria-Isabel Sanchez-Segura, Alejandro Ruiz-Robles, Fuensanta Medina-Dominguez. Uncovering hidden process assets: A case study. Information Systems Frontiers. January 2016.
A cornerstone of the long-term survival and sustainability of any organization is the status of its intellectual capital (Tsai 2012; Khan 2014). Data correlations confirm the linear relationship between a country’s intellectual capital and gross domestic product (Ståhle 2012), which is increasingly recognized as a factor of production (Abhayawansa 2014). Nevertheless, while the strategic role played by intellectual capital in value creation is well established in academia, it is not widely exploited in the corporate world (Demartini 2013).
Intellectual capital targets the valuation of intangible assets, which are all the non-tangible resources contributing to the delivery of a company’s value proposition (Stewart 1998; Marr 2008).
Angel and Ortiz (Angel 2006) suggest that the concept of intellectual capital should be equivalent to intangible assets. On the other hand, intellectual capital is defined by Edvinsson (Edvinsson, 1997) as the knowledge that resides in people, organizations, technology, procedures, customer relationships and professional skills that give a competitive advantage. Ross et al. (Ross, J., Ross, G., Dragonetti, N., Edvinsson, 1997) provide another important perspective of intellectual capital. They define intellectual capital as the processes and assets that do not usually appear in the balance sheet, on which they do, however, have an indirect effect.
Taking into account these definitions and the different perspectives that they provide, we can appreciate the connection between intellectual capital, intangible assets, knowledge and process assets. So, it is necessary to manage intangible assets or process assets, which are essentially knowledge sourced from different parts of any organization, in order to address and take advantage of intellectual capital.
A company will be unable to capitalize upon its knowledge, no matter how much it may have, unless it is accessible in the form of intangible process assets of proven use to the organization. On this ground, it is very important to identify which intangible process assets should be used and maintained in order to keep the company in good shape.
Abhayawansa, S., Guthrie, J., 2014. Importance of intellectual capital information: A study of Australian analyst reports. Australian Accounting Review, 24(1), pp.66–83.
Angel, M., Ortiz, A., 2006. Intellectual Capital (Intangible Assets) Valuation Considering The Context. Journal of Business and Economic Research, 4(9) pp-35-42
Demartini, P., Paoloni, P., 2013. Implementing an intellectual capital framework in practice. Journal of Intellectual Capital, 14(1), pp.69–83.
Edvinsson, L., 1997. Developing intellectual capital at Skandia. Long Range Planning, 30(3), pp.366–373.
Khan, M.W.J., 2014. Identifying the Components and Importance of Intellectual Capital in Knowledge-Intensive Organizations. Business and Economic Research, 4(2), p.297.
Marr, B., 2008. Impacting Future Value : How to Manage your Intellectual Capital, The Society of Management Accountants of Canada, the American Institute of Certified Public Accountants and The Chartered Institute of Management Accountants.
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Stewart, T., Ruckdeschel, C., 1998. Intellectual capital: The new wealth of organizations. Performance Improvement, 37(7), pp.56–59.
Tsai, C.F., Lu, Y.H., Yen, D.C., 2012. Determinants of intangible assets value: The data mining approach. Knowledge-Based Systems, 31, pp.67–77.