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Knowledge Risk and its Mitigation: Practices and Cases
Type: Book
ISBN: 978-1-78973-919-0

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Article
Publication date: 1 June 2002

A. Seetharaman, Hadi Helmi Bin Zaini Sooria and A.S. Saravanan

Claims the greatest challenge facing the accounting profession is understanding the huge difference between its balance sheet and market valuation. This gap represents the…

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Abstract

Claims the greatest challenge facing the accounting profession is understanding the huge difference between its balance sheet and market valuation. This gap represents the core value of the company – its intellectual capital represented by brands, products, competitive advantage, patents, trade marks, customer relationships, R&D, human capital etc. The present financial accounting framework is criticised, especially in the USA and Europe, as inadequate and failing to communicate the most important assets and resources of today’s business, known as intangible assets or intellectual capital. As a result, there is a huge value gap and distortions between a business entity value as reported in the financial statements with the value put by investors on the stock market or even in merger and acquisitions cases. In the new knowledge economy (k‐economy), knowledge rather than physical assets drives innovations, revenue and profits growth, and nurtures new competitive advantages. Looks at the challenges encountered by accounting and where it is heading in the k‐economy environment.

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Journal of Intellectual Capital, vol. 3 no. 2
Type: Research Article
ISSN: 1469-1930

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Article
Publication date: 18 March 2019

Daniel Tyskbo

The purpose of this paper is to advance the understanding of how intellectual capital (IC) unfolds in practice in organizations. This is done by answering the research…

Abstract

Purpose

The purpose of this paper is to advance the understanding of how intellectual capital (IC) unfolds in practice in organizations. This is done by answering the research question of how IC is recognized and managed in practice as expressed by managers.

Design/methodology/approach

An explorative, empirical and multiple case study was conducted, investigating four Swedish firms.

Findings

This paper illustrates how IC was recognized and managed in practice despite managers expressing uncertainty of what the IC concept means. More or less direct, formalized and purposeful ways were adopted. The IC elements and practices most important from a management perspective were those aligned with the overall strategy, but were seldom what was visible in financial reports.

Research limitations/implications

The use of an explorative, multiple case study limits the generalizability. However, the rich view gained of how IC unfolds in practice may not always be possible using large sample, survey-studies. Future research is therefore suggested to take this paper’s insights further and investigate IC in other organizations and in other national contexts.

Originality/value

This paper responds to the calls for third stage IC research, by showing how IC management in practice may not be as clear and straightforward as researchers tend to assume. It also adds to the importance debate on IC accountingization, by reflecting on how an accounting dominance may not fully capture IC inside organizations. A number of practical contributions are also made.

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Journal of Intellectual Capital, vol. 20 no. 2
Type: Research Article
ISSN: 1469-1930

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Article
Publication date: 26 July 2011

John Dumay and Jim Rooney

This paper seeks to examine the adage “If it can't be measured, it can't be managed” by presenting a case study of intellectual capital (IC) practice over six years at an…

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2152

Abstract

Purpose

This paper seeks to examine the adage “If it can't be measured, it can't be managed” by presenting a case study of intellectual capital (IC) practice over six years at an internationally recognised public sector IC leader – the Land and Property Authority of NSW (Lands).

Design/methodology/approach

The paper uses the case study method to examine critically over six years of research based on semi‐structured interviews and internal and external documents.

Originality/value

During this time Lands achieved national and international recognition for its IC management and reporting practices in the absence of a definitive set of IC measures. The authors show how Lands struggled with an inability to develop a specific set of IC measures to communicate its success, while still effectively communicating the impact of its IC practices through its annual reports and IC statements based on an ongoing narrative.

Findings

Lands demonstrated that it was able to meet the challenges associated with transitioning to a Government Business Enterprise through effectively managing IC resources, while also being dissatisfied with an inability to identify a set of concrete IC measures. Thus, the authors conclude from the evidence presented that it is possible to effectively implement IC practices without necessarily needing concrete IC measures. This is not because IC measures are not useful, but because Lands' IC reporting needs evolve based on the bespoke nature of its business, political expectations and changing business plans.

Research limitations/implications

As always, the observations and conclusions reached here are limited to the case of Lands and are based on the authors' objective analysis. Therefore, care should be taken in generalising any findings and this highlights the need to understand the IC context before applying the findings.

Originality/value

The conclusion highlights the struggle many organisations face when developing appropriate IC measures. While there appears to be a fixation on developing an “accounting for IC”, the authors advocate that the fixation is misplaced and the IC journey is better communicated narrating the story of how IC is mobilised. Doing so allows more focus on IC practices rather than on accounting. This opens the debate as to whether an accounting for IC can provide a solution, given that IC is more complex than developing an IC balance sheet.

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Journal of Intellectual Capital, vol. 12 no. 3
Type: Research Article
ISSN: 1469-1930

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Article
Publication date: 1 December 2005

Kristine Jacobsen, Peder Hofman‐Bang and Reidar Nordby

The purpose of this paper is to introduce the IC Rating™ approach as a management consulting approach to measure intellectual capital and to report on the implementation…

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2984

Abstract

Purpose

The purpose of this paper is to introduce the IC Rating™ approach as a management consulting approach to measure intellectual capital and to report on the implementation and experience in one case study firm.

Design/methodology/approach

The paper describes the IC Rating™ model in the context of the exiting literature in the field of IC measurement and uses a case study to demonstrate its practical application.

Findings

Based on the presented case study as well as implementations in other organizations we find the IC Rating™ model a useful tool to facilitate the analysis and discussion about intellectual capital in organizations.

Practical implications

The article gives a complementary view to the most commonly used score card methods and guidelines for intangibles on how intangibles can be measured. IC Rating™ focuses on the comparability between companies and industries as well as a simplification of how to interpret intangible measures.

Originality/value

The original idea for the paper was to answer the question “Why do companies really need to measure and develop intangibles?”. The answer is “To improve company financial performance”. The IC Rating™ methodology is therefore based on the answers to two other questions: “Which parameters does an executive manager need to have insightful knowledge of, in order to make the right decisions for the future?” and “From where and whom should the executive manager receive this information?”.

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Journal of Intellectual Capital, vol. 6 no. 4
Type: Research Article
ISSN: 1469-1930

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Article
Publication date: 19 April 2011

Sukhdev Singh and Monika Kansal

This paper aims to investigate inter firm intellectual capital (IC) disclosures and its variations in top 20 listed pharmaceutical companies in India, study the category…

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3392

Abstract

Purpose

This paper aims to investigate inter firm intellectual capital (IC) disclosures and its variations in top 20 listed pharmaceutical companies in India, study the category wise and element wise IC disclosures (ICD), find out the impact of ICD on the creation of IC in monetary terms, find out correlation between IC valuation and its disclosure, and test significance of correlation.

Design/methodology/approach

This is an exploratory and empirical study of ICD by sample companies in 2009 using content analysis. IC is valued as market value minus book value. Five‐point scale (0‐4), mean disclosure score, range, Chi‐ squares, Karl Pearson's correlation and Student's t‐test are used for analysis and interpretation.

Findings

Although top 20 companies of knowledge‐led industry, ICD are low, narrative and varying significantly among companies. ICD score varies in range of 4 to 36 against expected score of 96. External capital with mean score of 18.78 is the most disclosed category. Brands and business collaborations is most disclosed element of IC, followed by employee competence and internal organizational capital respectively. ICD leads to creation of IC in some companies. Markets reflected true valuations of ICD in seven companies, and high degree of inconsistency in 13 companies. Overall correlation between IC valuation and disclosure is negative, weak and insignificant.

Practical implications

Sector‐specific intangible asset monitors should be formulated to capture ICD.

Originality/value

The paper measures ICD using five‐point scaling technique, it uses Chi‐ square test (non‐parametric test) to calculate inter‐firm variations. The paper also correlates ICD and valuation of respective companies with Spearman's correlation for the first time in pharmaceutical companies in India. It proposes inclusion of fourth category i.e. sector‐specific items in existing models of ICD.

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Journal of Intellectual Capital, vol. 12 no. 2
Type: Research Article
ISSN: 1469-1930

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Article
Publication date: 1 January 1999

LEIF EDVINSSON and CAROLINE STENFELT

This paper focuses on the concept of Intellectual Capital (IC) of Nations and the need for a change of perspectives from financial to intellectual values. Although the…

Abstract

This paper focuses on the concept of Intellectual Capital (IC) of Nations and the need for a change of perspectives from financial to intellectual values. Although the paper briefly describes the concept of IC within business, the principal focus is on IC of Nations. IC of a Nation includes the hidden values of individuals, enterprises, and institutions, communities and regions that are the current and potential sources for wealth creation. It is proposed that every nation should start a process in visualising and measuring IC as a complement to traditional state finances. The present paper also examines the ongoing prototyping within Sweden, Israel and Austria that was initiated in 1996. In addition, the paper describes one of the tools — the IC Navigator for Nations — that can be used to present a pedagogical and holistic view and bring balance between intellectual and financial capital. Examples of indicators of IC for Sweden and Israel are described.

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Journal of Human Resource Costing & Accounting, vol. 4 no. 1
Type: Research Article
ISSN: 1401-338X

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Article
Publication date: 20 June 2008

John C. Dumay

The purpose of this paper is to investigate the manner and impact of intellectual capital (IC) disclosure. To frame the discussion, elements of Giddens' “structuration”…

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1676

Abstract

Purpose

The purpose of this paper is to investigate the manner and impact of intellectual capital (IC) disclosure. To frame the discussion, elements of Giddens' “structuration” theory and narrative theory are used to analyse change from within an organisation.

Design/methodology/approach

Using a case study approach, this paper explores the impact of the narrative disclosure of IC by an Australian public sector organisation, the New South Wales (NSW) Department of Lands (Lands), which is the first Australian government organisation to externally disclose IC.

Findings

By taking a structuralist approach to analysing the narrative disclosure of IC this paper moved beyond attempting to quantify or identify the wealth created by IC, and thus account for IC. By investigating the narrative disclosure of IC, initially in the form of the IC statement as a supplement to the annual report, it was shown how at Lands the use of narrative became routinized in the activities of management. Thus narrative was no longer used to only provide understanding of the IC measures and the reasoning behind the use of IC, but to provide a mechanism that engendered further management action and subsequent organisational change.

Research limitations/implications

The limitation of this paper is that it provides a lone example of a particular organisation from which generalisations are not possible. But it is possible to extend this research, using the structuration framework, to other organisations that have engendered the use of narrative to disclose IC to both internal and external stakeholders. Doing so will further question the domination of “accounting” within the IC paradigm and provide additional insights that allows practitioners and academics to develop additional tools for understanding and utilising IC.

Originality/value

This paper investigates the manner and impact of IC disclosure from within an organisation by use of “structuration” and narrative theory to analyse change as a result of the implementation of IC practices.

Details

Management Research News, vol. 31 no. 7
Type: Research Article
ISSN: 0140-9174

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Article
Publication date: 17 April 2009

John C. Dumay

The purpose of this paper is to investigate intellectual capital (IC) measurement critically so that the dynamics of intangible value creation can be better understood and…

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4435

Abstract

Purpose

The purpose of this paper is to investigate intellectual capital (IC) measurement critically so that the dynamics of intangible value creation can be better understood and to provide insights into how IC is constructed rather than what IC is.

Design/methodology/approach

This paper presents a case study on how a division of a large Australian financial institution utilised an approach based on complexity theory to investigate IC in practice. The method utilises narrative, numbers and visualisations to make sense of IC at a particular point in time.

Findings

It is argued that trying to “fit” existing popular frameworks to gather IC measurements inside organisations has little relevance to understanding the value‐creation process. As a result of the investigation of IC in this paper, it is found that, to date, IC measurement has relied heavily on “accountingisation” and that alternate methods to understand IC need to be developed. The paper highlights that academics and practitioners need to develop new skills.

Research limitations/implications

The case study is limited to the use of an alternate method to investigate IC in a particular organisational and cultural setting. The research opens the possibility of the benefits of changing thinking about both research into, and the practice of, measuring IC.

Practical implications

Rather than being constrained by the traditional models of measuring intangibles, by way of contemporary IC reporting frameworks, a more open process is outlined that could improve the timeliness and use value of the information.

Originality/value

This paper has relevance to both IC academics and practitioners as it critically examines the contemporary IC frameworks and offers an alternate method for examining IC which has the potential to add to a discourse which focuses on additional understanding of IC.

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Journal of Intellectual Capital, vol. 10 no. 2
Type: Research Article
ISSN: 1469-1930

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Article
Publication date: 1 October 2001

Jeltje van der Meer‐Kooistra and Siebren M. Zijlstra

In today’s knowledge‐based economy intellectual capital (IC) is becoming a major part of companies’ value. Being able to manage and control IC requires that companies can…

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4741

Abstract

In today’s knowledge‐based economy intellectual capital (IC) is becoming a major part of companies’ value. Being able to manage and control IC requires that companies can identify, measure and report internally on IC. As financial accounting rules ban full disclosure of IC in the annual report the external stakeholders lack information about companies’ value, which may have as a consequence that stakeholders make wrong or bad decisions. To remedy this situation, new tools must be developed which enable managers to identify and measure a company’s IC and to report on it within a consistent framework. The theory on IC is still in its infancy. Proposes to contribute to the development of a reporting model on IC. Analyses the various reporting models recently being developed and used in practice. Moreover, the existing reporting models have been discussed in depth with the management of three Dutch companies with a high degree of IC and with four financial analysts as external users of the information. Describes the findings of the discussions with the practitioners. Based on both the theoretical evaluation of the reporting models and the evaluation in practice, describes the building blocks of an IC reporting model.

Details

Accounting, Auditing & Accountability Journal, vol. 14 no. 4
Type: Research Article
ISSN: 0951-3574

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