Intellectual Capital

In a knowledge economy, a nation’s assets shift from the physical—natural resources or production facilities—to the intangible. These intangible assets comprise a country’s intellectual capital and, like financial capital, require astute management and shrewd investment if the country is to prosper. To facilitate such decision making, an assessment of these intangible assets can be conducted. We call this an intellectual capital audit. Resembling a corporate financial audit, it enumerates the country’s intangible assets. Also like a financial audit, it provides a benchmark for future audits and makes recommendations for improvement. However, unlike a financial audit, recommendations are based on comparisons with other countries that share certain key characteristics with the nation or are economic competitors.

The intellectual capital model favoured by Minerva for conducting an intellectual capital audit are those of the European MERITUM Guidelines. Designed to analyse the intellectual capital of a company, they break intellectual capital into three components: human capital; structural capital; relational capital.

Human capital represents the knowledge resources that reside in the workforce. Components of human capital include:

• Worker profile, such as age and gender
• Education, including international experience, and training
• Commitment, motivation and empowerment
• Well being, including emotional, fiscal and physical components

Structural capital is knowledge that stays within the entity at the end of the day, as opposed to human capital, which goes home at night. It is “all non-human storehouses of knowledge” and represents the entity’s attempt to retain and organize elements of human capital.

Structural capital can be further categorized as process capital and innovation capital. Process capital refers to an entity’s internal procedures. Innovation capital refers to the results of innovation that take the form of intellectual property rights such as patents and licenses.

Components of an entity’s structural capital include:

• General infrastructure such as hardware, software and offices. It can also be quantified as IT cost per worker, ratio of PCs to workers, number of servers and number and functionality of web sites
• Knowledge-based infrastructure such as intranets and databases
• Intellectual property rights such as patents and trademarks
• Administrative processes, which can be quantified by the response time to customer inquiries and the percentage of inquiries handled the same day as they are received.

Relational capital comprises an entity’s affiliations with partners and other external and internal stakeholders. Components of an entity’s relational capital include:

• Customer profiles, including variables such as loyalty and satisfaction. It can be quantified by factors such as market share and longevity of customer relationships
• Image and stakeholder relationships such as media coverage and marketing strategies
• Diffusion and networking, such as presence at conferences and the extent of operations done via telephone and Internet, It also includes alliances with institutions such as business schools and research institutes as well as commercial partnerships and collaborations
• Community relationships, including the fiscal and regulatory environment.

As is apparent from the descriptions above, some changes must be made before applying a model created for a corporation to a nation. In terms of MERITUM’s concepts of human, relational and structural capital, human capital must include not just workers but all citizens. Structural capital must include evaluations of national ITC infrastructure and educational and research institutions. Relational capital includes political alliances and trading partners as well as the fiscal environment.

An annual conference on Intellectual Capital for Communities in which we participate is held at the World Bank in Paris. Information on previous conferences can be found on the World Bank website. This year's IC5 conference will be held on 28-29 May.