Introduction
The industrialised world is rapidly moving into an era where economic growth is increasingly knowledge driven. The last twenty years have seen an exponential growth in the capabilities of information technology which has enabled globalisation, has increased international competition, has strengthened the need for continuous innovation and fuelled a growth in the services sector.
More of what is produced and consumed today is intangible. A greater emphasis is now placed on information technology skills, customer relationship skills and personal skills than on manual skills. By the year 2005 it is thought that manufacturing and agriculture in the UK could account for just 15% of output and employment. Ideas and knowledge are now the principle raw materials of the knowledge economy.
Research has shown that a firm can sustain a competitive advantage, by creating a barrier to entry, if it is able to “hold” valuable resources that are not held by other companies. In the past resources such as raw materials, capital, land and machinery were those that would provide the entry barriers. As this is no longer the case other resources such as brand, corporate routines, skills and creativity are now those resources which give a competitive advantage. It is in fact the intangible nature of these resources which gives a firm the ability to create a sustainable competitive advantage. A recent example was observed during the dot com phenomena, when internet start up companies could not obtain the needed technical resources because the skill sets they needed were rare.
As products, raw materials and skill sets have become ever more intangible so the inherent value of companies has changed. A recent study by the Brookings Institution on the value of non financial companies showed that in 1978 twenty percent of corporate value was attributable to intangible assets, whereas in 1998 this had increased to eighty percent.
As the world has undergone this metamorphosis, practitioners, accountants and academics alike have identified a perceived need to manage, measure and report on the intellectual value of companies. Although a proliferation of measurement tools have been created it is still questionable as to whether companies are seeing any benefit in measuring the more intangible aspects of their businesses. There appears to be confusion over whether the measurement of intellectual resources should be used for control and compliance, as a tool to help management grow the business, or whether the reporting of such data will lead to the capital markets viewing the company more favourably.
|
