Pan-Pacific Conference XXXIV. Designing New Business Models in Developing Economies

Model for the management of intangible assets in companies in emerging
markets
Luis Batista Ugarelli Betalleluz
CENTRUM Pontificia Universidad Católica del Perú
a20154639@pucp.pe
ABSTRACT
This research is intended for solving the problem of
inadequate or inaccurate models, understood as
business models, when applied in a challenging and
atypical reality as the emerging markets. When it
comes to explain the dynamics of value creation for
those markets, relying on intangible assets as a
critical resource of the knowledge economy, features
as informality, poor institutions or corruption, cannot
be overlooked. An instrument that represents a
model for value creation involving intangible assets
that has been used intensively in the last years is the
Value Added Intellectual Coefficient (VAIC TM ).
Despite all the advantages that applications of this
instrument bring, results have also attracted some
criticism; coming basically from some alleged
theoretical contradictions and the diversity of results
obtained by different authors. We consider that such
mixed results are due in part to the fact that those
applications are not paying detailed attention to the
particular features in the markets where they have
been tested. Therefore, the goal of this research is to
fill this knowledge gap, by means of a quantitative,
longitudinal approach, analyzing public companies
in the consumer sector, in the countries of the Pacific
Alliance (Chile, Colombia, Mexico and Peru) using
their financial data for ten years, testing different
database cuts, incorporating more emerging market
features and making the necessary adjustments to
improve the robustness and consistency of the
results. The need for a particular model that proves
to be better suited to the reality of the emerging
markets, will help greatly in terms of a better
understanding of the problems originated from the
misrepresentation of intangible assets and for its
adequate management by business and policy
makers.
INTRODUCTION/BRACKGROUND
Intangible assets are gaining more importance and
recognition since their inception by the late 90s
(Lev, 2001). However, lack of standard definitions
and approaches make cumbersome to develop
strategies across the board, more over if those are
intended for companies located in markets that are
in a different stage of development as the emerging
countries (McGarvey, 2007). As emerging markets
are progressively transitioning to be fully fledged
knowledge economies, the same urgency on the
managing of intangible assets as their developed
counterparts apply. This has the caveat that it is not
possible to deploy the same tools, unless the latter
are adapted to factor in elements as informality and
others typical of emerging markets. We consider
that a model
intended for the emerging markets and embedded
with their features can be built, starting with the
demonstration that sizeable assets are hidden in the
company's balances and from there, the evidence to
entrepreneurs and governments, shall be compelling
enough to take more decisive actions in that regard,
before the value creation becomes value destruction.
LITERATURE REVIEW
Literature about models for the management of
intangible assets, has shifted its focus from the
detection to the taxonomy and finally to
measurement, which ultimately impacts
management. This trend comes up with a set of
postulates for the general management of these
types of assets through a model. Models for
intangible assets of all sorts, as an imperfect
representation of the reality have their own
shortcomings. They all have in common also that
the realities that have been primarily tested are those
where the knowledge economy is well embedded.
The intellectual capital concept can be assessed at
diverse levels as micro (companies, institutions etc.)
or macro (countries, regions). In all those
categories it is evident that the progress reached by
the developed economies accommodates for model
designs tailored to those economies, but not
necessarily applicable to the realities in emerging
markets.
Particular literature about models for the
management of intangible assets in emerging
markets, showed that the research efforts on that
subject were more oriented to the detection of
intangible assets at a macro level. For this purpose,
assumptions were made that are applicable to
economies in more advanced development phases,
such as bigger, more evolved and sophisticated
financial markets, low or practically nil informality
and very aggressive R&D promotion schemes and
IP protection which grants and nurtures the birth
and development of intangible assets. However,
although the same is not entirely true for emerging
markets this does not mean intangible assets do not
exist there. On the contrary, the researcher needs to
be very aware of the pitfalls to assess those using
tools that do not correspond to the latter’s reality.
Among the models that are being used in the last
years, Value Added Intellectual Coefficient
(VAIC TM ) has gained a growing popularity in the
academia. We believe that this interest in VAIC TM
comes from the current state of the art, and that this
instrument can be perfected until financial
information and reporting is up to the task and
produces better data to assess financially intangible
assets as critics on that regard said (Lev & Gu,
2016). Criticism around VAIC TM (Andriessen,
2004; Ståhle et al., 2011; Starovic & Marr, 2003),
have been clarified by Iazzolino (2013). However,
mixed results, especially in emerging markets, are
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