Intellectual Capital Measurement Methods

Intellectual Capital Measurement Methods
Capital (RC) concerns connections and relation of the organization with the external environment.
It is value of relationship with customer, strategic partners, employees etc.
The figure shows that physical infrastructure is also a very important part of intellectual
capital of the organization, which differs a bit from definition by Roos, Pike and Fernstrom.
The reason for including physical assets into Intellectual Capital assets is that they may have
components, such as databases, servers, and physical networks like intranets, which are
based on specific knowledge and the combination of them is unique to one organization.
In the end is necessary to notice that Intellectual Capital includes both created knowledge all
the organization and its individual participant, their experience, abilities and innovations and
also all the things that support efficiency of work in the organization (computers equipment,
databases, organizational structures, patents, trademarks, licences) but also methods, techniques
or relationships with stakeholders worked out by the organization. These elements
combine and interact with each other in unique way to create value.
Detailing and describing list of all components of the Intellectual Capital structure is a very
difficult task. Intellectual Capital structure components are individual for each company. But
if the managers of companies know detailed structure of IC existing in their companies, they
will be aware of size and value intellectual potential, which they possess. It can cause a better
understanding the concept. Than they could choose proper Measurement Methods and proper
manage their assets. Companies, which learn to measure and manage their Intellectual
Capital in a new way can significant improve their performance in a competitive market.
Methods Of Measuring The Intellectual Capital
The interest on managing the Intellectual Capital has caused the development of different
methods of measuring it.
There are several group of methods of measuring the Intellectual Capital, which can be used
in order to evaluate this assets. Some of these methods were attempts made by different
companies for their internal use rather than the development of a universal measuring method.
But they still exist and are basis to create new methods.
According to Luthy (1998) and Williams (2000) all methods can be divided into four main
groups: 8
1. Direct Intellectual Capital Methods (DICM) – estimate the dollar value of intangible
assets by identifying its various components. Once these components are identified, they
can be directly evaluated, either individually or as an aggregated coefficient.
2. Market Capitalization Methods (MCM) – calculate the difference between a company’s
market capitalization and its stockholders’ equity as the value of its intellectual capital
or intangible assets.
3. Return on Assets Methods (ROA) average pre-tax earnings of a company and divide
them by the average tangible assets of the company. The result is a company ROA that
is then compared with its industry average. The difference is multiplied by the company’s
average tangible assets to calculate an average annual earning from intangibles. By
dividing the above-average earnings by the company’s weighted average cost of capital
or an interest rate, one can derive an estimate of the value of its intangible assets or
intellectual capital.
4. Scorecard Methods (SC) – identify various components of intangible assets or intellectual
capital and indicators and indices are generated and reported in scorecard or
8
http://www.sveiby.com/articles/IntangibleMehtods.html, and G. Roos, S. Pike, L. Fernstrom, op. cit.
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