Proceedings of the 3rd European Conference on Intellectual Capital

Nargiza Abdullaeva and Campbell Warden
In <strong>the</strong> impact chain below are shown <strong>the</strong> development <strong>of</strong> <strong>the</strong> basic factors/driving forces <strong>of</strong> IC and
<strong>the</strong>ir impact on <strong>the</strong> main goal (ED) through economic growth, which is <strong>the</strong> main factor <strong>of</strong> ED (see
Figure 3).
Education and Training help to create, to develop and to transfer knowledge and skills, which, in <strong>the</strong>ir
turn, are <strong>the</strong> main preconditions and factors <strong>of</strong> economic growth. And economic growth is <strong>the</strong> main
component <strong>of</strong> economic development.
Training and Skills have a more applicable character than education and knowledge and are directly
related to <strong>the</strong> value-added creation and economic growth. Training and Skills development are one <strong>of</strong>
<strong>the</strong> main driving forces <strong>of</strong> “evolutional economic growth”, or steady economic growth. At <strong>the</strong> same
time, new knowledge (innovation), based on proper education, can be <strong>the</strong> cause <strong>of</strong> “revolutionary
economic growth”, which can lead to faster economic development. This supports <strong>the</strong> significance <strong>of</strong>
both government and public R&D investments.
Education/Training and Knowledge/Skills are interrelated to each o<strong>the</strong>r, without one it is difficult to
produce <strong>the</strong> o<strong>the</strong>r.
Figure 3: Basic impact <strong>of</strong> intellectual capital on economic development through <strong>the</strong>ir driving forces
Source: Composed by authors
While assessing <strong>the</strong> impact <strong>of</strong> Intellectual Capital on economic development, it is important to take
into account that <strong>the</strong>re should be certain preconditions for <strong>the</strong> fullest implementation <strong>of</strong> <strong>the</strong> results <strong>of</strong>
IC development in economic development.
Firstly, knowledge creation is closely related to <strong>the</strong> quality, relevance and accessibility <strong>of</strong> education.
By quality <strong>the</strong> level <strong>of</strong> teaching and research undertaken at <strong>the</strong> educational institutions are implied, as
well as <strong>the</strong> relevance and compliance with <strong>the</strong> demands <strong>of</strong> <strong>the</strong> current market. At least two questions
are arising regarding this issue: Does education always lead to increased value-added, and is it
always connected to <strong>the</strong> creation <strong>of</strong> necessary for current market needs knowledge? The main
problem <strong>of</strong> <strong>the</strong> low-income developing countries is “brain-drain”, despite high budget expenditures on
education, because <strong>of</strong> low reflection <strong>of</strong> education to market requirements. In order to maintain <strong>the</strong> IC
development in <strong>the</strong>se countries, and especially, to support <strong>the</strong> conversion <strong>of</strong> its results into economic
growth and development, it is necessary to ensure <strong>the</strong> balance between supply and demand in <strong>the</strong>
education-knowledge-skills- market structure.
Secondly, <strong>the</strong> role <strong>of</strong> <strong>the</strong> government is significant in <strong>the</strong> whole “IC-ED” chain. Support <strong>of</strong> education,
knowledge and skills transfer across regional, national and international borders suppose efficient
functioning <strong>of</strong> rules and motivations, clearly defined in <strong>the</strong> legislation.
Thirdly, <strong>the</strong> level <strong>of</strong> absorption capacity <strong>of</strong> <strong>the</strong> new knowledge <strong>of</strong> <strong>the</strong> country plays an important role in
providing <strong>the</strong> base for fostering <strong>the</strong> impact <strong>of</strong> IC on ED. It is natural that <strong>the</strong> countries with
conservative mentality, low literacy/education rate, low democracy presence, have less potential in
absorption, implementation and development <strong>of</strong> new knowledge.
Fourthly, in order to enhance economic growth it is vital to provide a favourable environment for
IC/business functioning and development in <strong>the</strong> country, which is impossible without efficient
government regulation.
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