Lecture 4 intellectual capital
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Transcript of Lecture 4 intellectual capital
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Analysis 1: Evidence and the Nature of Knowledge in the Digital Age
Topic: Intellectual Capital
Topic Number: 4
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LEARNING OBJECTIVES
• To describe the development of the concept of intellectual capital from a historic perspective
• To discuss commonalities between different intellectual frameworks as a mixture of human capital, social capital, organisational capital and customer capital
• To outline issues related to the notion of intellectual capital as a narrative
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Questions to think about during the session
• If you were asked to articulate your own personal capital in a job interview, how would you go about doing it?
• How would you describe your personal capital?
• How would you place a value on your personal capital?
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Questions to think about during the session
• What is ‘intellectual capital’?
• Why do businesses think ‘intellectual
capital’ is important at present?
• How do you develop it?
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IS INTELLECTUAL CAPITAL THE MARKET TO BOOK RATIO?
• ‘the difference between the market value of a publicly held company and its official net book value is the value of its intangible assets’ (Svieby, 1997)
• ‘intellectual material – knowledge, information, intellectual property, experience – that can be put to create wealth’ (Stewart, 1997)
• ‘the economic value of two categories of intangible assets of a company: organisational (“structural”) capital and human capital’ (OECD, 1999)
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WHY DO WE WANT TO MEASURE INTELLECTUAL CAPITAL?
• To improve management practices?• For external analysts, bankers, brokers,
customers, etc.?• Can we measure the tacit ‘know how’?• Are snapshots meaningful?• Fluctuations in capital markets?• Dangers of benchmarking?
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CONCEPTUAL ROOTS OF INTELLECTUAL CAPITAL (Roos et al., 1997)
Figure 3.1 Conceptual roots of intellectual capital (Roos et al. 1997)
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HISTORICAL HIGHLIGHTS OF INTELLECTUAL CAPITAL
Table 3.1 History of intellectual capital
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HISTORICAL HIGHLIGHTS OF INTELLECTUAL CAPITAL
Table 3.1 History of intellectual capital (Continued)
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HOW DO WE MEASURE ORGANISATIONAL PERFORMANCE?
• ROI, ROCE etc.?
• Financial engineering – undervaluation of assets, provisions, capitalization of costs, depreciation, goodwill, brands, off-balance sheet finance?
• EFQM – leading European companies include non-financial indicators
• Balanced Scorecard?
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EFQM EXCELLENCE MODEL
Figure 3.2 EFQM excellence model
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THE BALANCED SCORECARD (Kaplan and Norton, 1992)
Figure 3.3 The balanced scorecard (from Kaplan and Norton 1992)
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HOW DO WE COMPARE IC FRAMEWORKS?
• Is the goal for management to extract value from the organisational ‘know how’ or to create value through developmental and cultural relationships?
• Human capital and social capital are common threads
• Organisational capital
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HUMAN AND SOCIAL CAPITAL
• Hamel & Prahalad (1994) – success linked with development and utilisation of core competences
• Human capital – human embodied knowledge
• Social capital – nature of relationships in a cooperative entity
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SOCIAL CAPITAL
• Structural dimension showing the linkages and connections between actors such as the density and hierarchy of networks
• Relational dimension that provides the history of interactions between individuals resulting in certain levels of trust, norms and expectations
• Cognitive dimension that leads to shared meanings, interpretations, mental models and alignment of views
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ORGANISATIONAL CAPITAL
• Pure form such as organisational structure
• Hybrid form – embodied in individuals through socialisation
• Investments will lead to greater worker productivity?
• Differences between structural, human and organisational capital?
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INTELLECTUAL PROPERTY
• Intellectual assets – documents, drawings, software programs, data, inventions and processes
• Intellectual property – claim ownership to patents, copyrights, trademarks and trade secrets
• In knowledge based economy, do we need to manage intellectual property strategically?
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PATENTS
• Offer greatest level of protection• Gather revenue from licensing agreements• 1998 – ‘method of doing business’ patents in US• Smart patents – extend the life by using
continuation patents• File patent application at Patent Office –
undergoes few years of ‘examination period’• Normal life 20 years• WTO – Agreement on Trade Related Aspects of
Intellectual Property Rights in 1995
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SMART PATENTS
Figure 3.5 Smart patents: using patents and continual patents
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COPYRIGHT
• Prevent infringements on copying, distributing, performing or displaying material
• Protect the original works for a longer period of 100 years
• Problems of copyright in the digital age and the potential need for encryption
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KODAK – POLAROID
• 1975 – Kodak ignored vast patent barriers Polaroid had erected in the high growth instant camera market
• Kodak was found to have infringed Polaroid’s patents
• Ordered to pay $925 million in damages • Shut down its manufacturing plant • Retrieve the 16 million cameras sold
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FINANCIAL REPORTING OF IC?
• Use notion of fair value• FASB (1999): ‘an estimate of the price an entity would have
realized if it had sold an asset or paid if it had been relieved of a liability on the reporting date in an arm’s-length exchange motivated by normal business conditions’
• EU (2000): 1. A market value, for those items for which a reliable market can readily be identified. Where a market value is not readily identifiable for an item but can be identified for its components, the market value of that item may be derived from that of its components; or2. The value resulting from establishing valuation models and techniques, for those items for which a reliable market cannot be readily identified. Such valuation models and techniques should ensure a reasonable approximation of the market value
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INTELLECTUAL CAPITAL AS A NARRATIVE
• Found knowledge as a narrative was most useful when centred around ‘value-to-a-user’
• Needs to highlight ‘positive’ aspects as well as problems and pitfalls for it to succeed
• Provides real life examples of trials and tribulations
• Reliability of narrative?
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Mouritsen et al. (2002)
Figure 3.6 Example illustrating framework for key components of an intellectualcapital statement (adapted from Mouritsen et al. 2002)
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KNOWLEDGE AUDIT – VALUE-BASED PERSPECTIVE (Truch, 2001)
Figure 3.7 Process of knowledge auditing (adapted from Truch 2001)
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Reading and preparatory work to be done
Read:• Jashapara, A. (2011) “ Knowledge Management:
An Integrated Approach” Pearson Education, Chapter 3
Work to be done before the seminar:• Carry out all the reading above• Answer the questions on the handout• Bring your work to the seminar
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Essential work for next week
• Please consult the OLE for details of:– Essential readings*– Seminar/workshop preparation work*– Recommended further readings– Any additional learning
* Essential readings and preparation work must always be completed in time for the next session
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End of presentation
© Pearson College 2013