Understanding Intellectual Capital in Multinational Companies
Added on 2019-09-23
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Blog WritingIntellectual CapitalIntellectual capital is one of the important areas for developing the competitive advantage of organizations. It includes the knowledge, expertise and the skills of the employees of the company which can be used for achievement of the goals. It is an asset for the organization, and include all the informational resources that can be used to conduct the operations. Thus, inshort, it can include, intangible assets of the company, employee's knowledge and expertise and the organizational process. There are several international institutes and bodies which have tried to define intellectual capital. The Organization for Economic Co-operation and Development indicates that the intellectual capital is the "economic value of various categories of intangible assets that an organization use for its progress." It has some of the important characteristics which are:Invisible- The aspect of intellectual capital is that it is invisible and therefore cannot be seen by the employees or the management.Sustainability- One of the important features of intangible assets is that it helps in the future growth of the organization. Thus companies with quality human capital and information capital have a higher chance of continuing their operations for the long term. Use of knowledge- One of the differentiating features of the intellectual capital is that it uses the knowledge of the employees and the technology to create growth for an organization. Aspects of intellectual capitalSome of the important aspects of intellectual capital include the following:Human capital- It a type of asset for the organization which is not provided on the balance sheet. It includes the economic value of the skills and the experience of the employees of an organization. Some of the human capital include loyalty, health, punctuality, the intelligence of the employees. The main idea is that all the employees are not equal, but the quality of this asset can be increased by investing in training, education, abilities, and experience of the employees. This capital is an important asset for an organization, as it can help to improve the profitability and productivity of the company. There in the globalized environment of the 21st century, several companies have been investing in the development of human capital. Some of the experts also believe that human capital is important for the success of an organization. Their knowledge and skills can lead an organization towards innovations and success. These resources are managed by the human resource department of the company who
handle various activities like, acquisition, recruiting, managing and influencing the employees towards better performance. The role of the human resource department has been increasing as the companies are becoming more complex, and have different levels of the hierarchy of employees. Some of the experts also believe that there is a growing concern about the migration of the talent to the developed nations. The people with good quality education and skills often migrate to foreign countries, for better work positions and salaries. This trend is called as, "brain drain". One of the distinguishing features of this capital from the other capital is that these cannot be calculated accurately in monetary terms. It is calculated through the return on investment of the training and development programs of human capital. Like other assets, this capital also depreciates, if they are unable to keep up with the innovation and technologies. Brand awarenessBrand equity is one of the important intellectual capital which is possessed by the companies due to its brand image. The awareness and likeness for a brand help to build the brand image ofthe organization. This is an important intellectual capital as it helps in the sale of the goods and services of the organization. A brand which is highly known has a higher chance of achieving sales targets than an organization with lesser-known brad. This is termed as an important capital by the modern financial experts and professionals. One of the important aspects of brand equity is the differential effect. It creates a space in the minds of the target customers about the offering of the company. The development of the brand helps to create the difference. Another key factor why brand awareness is important intellectual capital is through the knowledge it provides to its customers. When the customers appreciate the differentiation, it helps to build an asset for the organization.Information Capital- Informational capital is that capital, is linked with the sharing of information among the organization and its subsidiaries. It is an important concept which identifies the intrinsic value of the knowledge or the information as possessed by an organization. This capital enables the exchange of knowledge and information for the future success of the organization.In companies, this capital is defined as the data or the information which has high value and canbe used for making important decisions for the company. These data are often stored data storing systems or servers. And are accessed through the company information-sharing networks, internet systems, and database. This is a type of capital resource which is used by individuals and the companies. A simple example is that an individual can store his data related to monthly expenditure and compare them to get useful information about his expenditure trend. The effectiveness of this capital is dependent on the way the companies use them and integrate them with the information technology of the organization. Therefore the
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