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Intellectual Capital Essay

864 words - 4 pages

Intellectual Capital
The term intellectual capital (IC) is synonymous with Intangible capital. IC collectively refers to all the resources and assets that defy conventional accounting measures, but which still determine the value and the competitiveness of an enterprise. IC is commonly divided into the areas of Human Capital, Structural Capital, Relationship/Relational Capital, and the Business Model. In our modern Information and Knowledge Economy, intangibles have progressively become the driving factors around which business revolves. Conventional bricks-and-mortar accounting is no longer sufficient to explain how Google, Netflix, LinkedIn, Apple, and General Electric are far more ...view middle of the document...

So, the main point is how an organization can affect the firm's stock price using the leverage of intellectual assets. The intangibleness refers to the fact that IC is not easily translatable in financial terms. All other assets of a company, such as a piece of real estate or a credit note, can be monetized: i.e., there exist standard criteria for expressing their value in currency. IC, instead, is mainly made of elements (such as the quality of employees or the reputation of a brand among consumers) for which there is no consensual model for monetary expression. A more precise name for IC would therefore be "non-financial assets".

Elements
In all definitions of IC, the following taxonomy can be recognized: Human Capital The value that the employees of a business provide through the application of skills, know how and expertise. Human capital is an organization’s combined human capability for solving business problems. Human capital is inherent in people and cannot be owned by an organization. Therefore, human capital can leave an organization when people leave. Human capital also encompasses how effectively an organization uses its people resources as measured by creativity and innovation. Structural Capital The supportive infrastructure, processes and databases of the organization that enable human capital to function. Structural capital includes such traditional things as buildings, hardware, software, processes, patents, and trademarks. In addition, structural capital includes such things as the organization’s image, organization, information system, and proprietary databases. Because of its diverse components, structural capital can be classified further into organization, process and innovation capital. Organizational capital includes the organization philosophy and systems for leveraging the organization’s capability. Process capital includes the techniques,...

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