Intellectual Capital: Measurement and Management

During the XVI April International Academic Conference HSE held a joint session on Intellectual Capital of Companies together with the European Institute of Advanced Studies in Management (Brussels). During this session, Professor Zambon of the University of Ferrara gave a keynote lecture and participated in round-table discussions on various problems associated with intellectual capital and intangible assets.

This visit marks the start of a long-term programme of cooperation with Professor Zambon and University of Ferrara which he represents. According to Irina Ivashkovskaya, a Professor from the Faculty of Economics, ‘working with Professor Zambon will promote the study of the practice of using intellectual capital in Russian business, as well as conducting comparative research on its usage, assessing its contribution to companies’ efficiency, the growth in their value, the work of their board of directors, the practice of disclosing information on intellectual capital compared with European companies and companies from large countries with developing capital markets (India, Brazil, South Africa, and China). This research is currently being carried out at the International Laboratory of Intangible-driven Economy at HSE Perm, as well as at Corporate Finance Centre at HSE Moscow. Future plans include joining forces with the St. Petersburg and Perm campuses to carry out such research and organize conferences. In addition, a regular dialogue needs to be held with businesses and official insitutions on applying, analysing and appraising intellectual assets. Round tables might also be carried out with businesses on this topic.’

HSE News Service has talked to Professor Zambon about his research and the HSE April Conference.

— What are your impressions of the conference?

— This conference is obviously very large and it deals with various forefronts of academic research. In this respect it’s a really great organizational effort and at the same time a great opportunity that has been offered to not only Russian, but also international economists to confront, discuss and debate on all up-to-date issues that our economies are facing. One particular aspect I’d like to stress is the innovativeness of this particular section of the conference, the session on intellectual capital. This is clearly a new phenomenon appearing on the horizon of economic studies. Intellectual capital is an important variable and has been for a long time overlooked. I believe it could be a very fruitful topic and area for research in future, and I think this conference is doing a good job to show this.

— Would you say the value of intangible capital varies from country to country, is it, for example, a feature of post-industrial economy only or is it a global phenomenon?

— The difficulty, but also the beauty of this topic is the fact that intangible capital varies across countries, but also across territories, companies and organizations. It’s a variable that takes time to accumulate. It’s very difficult to accumulate intellectual capital in a short time, because it’s made up of different aspects, and, in particular, knowledge. We all know that knowledge is a complicated factor, but it’s fundamental for our own development on the personal level. This, of course, applies even more to nations, countries, and regions. Companies have different intellectual capital because they have different capacity of creating value and intellectual capital is linked to value creation (keeping in mind that value is not necessarily cash).

Another interesting thing is intellectual capital of territories and of nations. During my speech, I mentioned brands like ‘Made in Italy’, ‘Made in Germany’, ‘Made in Russia’ – each of these brands are public intangibles available to the community, in this case, businesses. And each of them brings different sensations, perceptions, and feelings: ‘Made in Germany’ or ‘Made in Italy’ are different.

— Can these public intangibles be built with the same tools that are used in private business?

— Yes and no. First of all, you need to raise awareness on many levels. Sometimes people talk about innovation, but they don’t ask themselves what the sources of innovation are. If you think about it, the sources of innovation are intangible, in other words, intellectual capital should be understood.

Then, intellectual capital should be managed. You clearly can’t manage a territory exactly like a company, but still the basic principles are the same: awareness, creation of capacities to develop intellectual capital, a better way to report intellectual capital, because the information about the intellectual capital is vital to take decisions. There have been studies demonstrating that companies, territories, and nations with higher intellectual capital also have higher capacity of creating value.

— How could the theory of intangible capital and resources apply to an educational institution?

— It’s interesting to know that ten years ago in Austria the state approved a law obliging Austrian universities to produce an intellectual capital report every year, in order to make an effort to show what they are doing, the impact of students, the impact of the professors etc. It’s an interesting way to show that intellectual capital applies also to non-profit organizations. Faculty qualification, papers, organizational climate – it is a comprehensive picture of what is non-financial. Of course, a university has accounts, money coming and going, but the interesting thing for a university is that the non-financial aspect is more important than financial equilibrium. That’s why the concept of intellectual capital can be very helpful to try to show some aspects that are sometimes hidden in the usual accounts.

— Are university rankings a measure of this intellectual capital?

— Yes, they are. However, here we are talking about much more articulated type of information. You have to show what you are doing with the public money and with the students’ money, and it’s healthy that you show this with a special report. But it is not just talking; the important thing is metrics accompanied with some narrative. This is a new way to look at the whole issue. It will take time because we are used to financial measures: rubles, dollars, profit, bottom line. However, to some extent, it’s illusory, because profit does not exist in practice: it’s just a calculation.

Intangible assets generally are early warnings of what is going on. They act like a red alert. You need to anticipate your understanding as much as possible to govern processes that are always very complex. Once you get to the cash flows, it’s probably too late.

— Have you done any research using Russian data?

— Not yet, but we are talking about it with Professor Irina Ivashkovskaya. We have a number of projects connected with Russia – we are bringing here the most important academic event in Europe on intangibles next year, our interdisciplinary workshop on Intellectual Assets: Measurement and Reporting. We have been organizing it since 2005 in cooperation with the European Institute of Advanced Studies in Management. The workshop will be in Russia, probably, in Moscow. I hope also the governmental officers will understand the importance of the issue and that there will be some occasions to exchange ideas with them. In Europe there is a renewed interest in this area, particularly by the European Commission and OECD. It’s a technical topic, but it’s also has to do with soft policy, soft skills, soft parts of organizations, and we all know they are important.