science

Intellectual capital management

Intellectual capital management is a science topic covered in the lgStudy science library. This page brings together a partial reference excerpt, illustrations, worked examples, real-world applications and a short study plan, so you can understand Intellectual capital management rather than just read about it. In short: Intellectual capital is the sum of all knowledge; implying that knowledge that exists at different levels both within or outside the organisation has to be taken into account for intellectual capital. The intangible nature of many knowledge products and processes, in combination with the increasing importance of their value in corporate balance sheets leads to a growing interest in management of intellectual capital.

Key takeaways

Intellectual capital management belongs to science; place it in that map before memorising details.
Learn the definition first, then one example that makes the definition concrete.
Connect Intellectual capital management to a quantity you can measure, compute or draw — that is where exam questions come from.
Reproduce the core statement of Intellectual capital management from memory before moving on to harder problems.

Reference excerpt

Intellectual capital is the sum of all knowledge; implying that knowledge that exists at different levels both within or outside the organisation has to be taken into account for intellectual capital. The intangible nature of many knowledge products and processes, in combination with the increasing importance of their value in corporate balance sheets leads to a growing interest in management of intellectual capital. Creating, shaping and updating the stock of intellectual capital requires the formulation of a strategic vision, which blends together all three dimensions of intellectual capital (Human, Structural and Relational Capital) within the organisational context through exploration and exploitation, measurement and disclosure. Therefore, the organisational value of intellectual capital is developed via an ongoing and emergent process focused on the capability to leverage, develop and change the dimensions. The management of intellectual capital is conceptualised as occurring via a multiple stage process, governed by an evolutionary logic. The intellectual capital management is defined as a cycle of four inter-related sets of practices: Strategic Alignment, Exploration and Exploitation, Measurement and Reporting of intellectual capitals. However, an extensive literature has found that one of the main risks for intellectual capital comes from inside the organizations. Employees have access to organizations’ confidential information and key technology and therefore tend to add risks if Procedural information security countermeasures (PCM) are not taken care of adequately. An example of good measure for robust intellectual capital management that could decrease insider risk is setting up education, training and awareness (SETA) programs. Intellectual capital plays an important role in generating value for companies, as well as for the global economy. With the understanding of the value of the intellectual capital, companies have developed completely new ways to manage existing knowledge. This has many strategic implications for organizations business operations. The strategic role of the intellectual assets is therefore constantly growing and organizations are looking for more effective intellectual capital management practices. Because of importance of intellectual capital, nowadays we are talking about knowledge workers who are constantly modifying, utilizing and creating new knowledge to add value to the operations of companies. Therefore, it can be said that the management of intellectual capital is a significant factor in organizations value creation. Sometimes intellectual capital is also associated with the term knowledge management. Researches have tried to find out the connection between these terms.

See also Capital management Intellectual capital Structural capital Human capital Relational capital Knowledge Management Knowledge worker

References

Worked examples

Example 1 — a first encounter with Intellectual capital management

Start with the simplest possible case. Write down what Intellectual capital management claims or describes in one sentence, then invent the smallest concrete situation in which that sentence is true. In science, the smallest case is usually a single object, a single equation or a single measurement. Check that every symbol or term in your sentence has a meaning in that case.

Example 2 — changing one variable

Take the situation from Example 1 and change exactly one quantity: double it, halve it, or set it to zero. Predict what should happen to Intellectual capital management before you calculate. Comparing your prediction with the result is the fastest way to find out whether you understand the idea or only the words.

Example 3 — an exam-style question

Typical questions about Intellectual capital management ask you to (a) state it precisely, (b) apply it to given data, and (c) explain a limitation. Practise writing all three answers in under five minutes; the third part is what separates a full-mark answer from an average one.

Applications of Intellectual capital management

In research: Intellectual capital management appears in science research whenever the underlying quantities have to be modelled precisely. Papers usually cite it as a starting assumption and then explore where it breaks down.
In technology and industry: Engineering practice reuses Intellectual capital management in design rules, simulations and safety margins. Knowing the idea lets you read a specification sheet and understand why the numbers look the way they do.
In the classroom: Intellectual capital management is common in secondary-school and first-year university syllabi. It links to neighbouring topics Intellectual capital, Knowledge economy, Knowledge management, so understanding it makes those chapters shorter.
In everyday life: Look for Intellectual capital management outside the textbook — in sport, cooking, traffic, electronics or the sky above you. An example you found yourself is remembered far longer than one you were given.

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How to study Intellectual capital management in 20 minutes

Read the reference excerpt below once, without taking notes.
Close the page and write down what Intellectual capital management means in your own words.
Compare your version with the excerpt and mark what you missed.
Work through the three examples above with pen and paper.
Explain Intellectual capital management out loud to somebody else — or to Teacher Smith in the lgStudy chat.

Frequently asked questions

What is Intellectual capital management in simple terms?

Why does Intellectual capital management matter?

Because it connects several science ideas at once: it gives you a definition you can apply, a quantity you can calculate, and a way to check whether a result is plausible.

How should I study Intellectual capital management?

Read the excerpt, restate it from memory, then work through the examples and applications listed on this page. The five-step study plan above takes about twenty minutes.

What does this page cover?

It gives you a compact reference excerpt plus original lgStudy explanations, examples, applications and study material on Intellectual capital management.