INTELLECTUAL CAPITAL KEY TO PROSPERITY

INTELLECTUAL CAPITAL KEY TO PROSPERITY

Swedish Academic offers a league table

UK nineteenth

Comment

Potential for future competitiveness is increasingly based on aspects of the knowledge economy but other conditions must also be met for a country to become richer, according to Leif Edvinsson of the University of Lund in Sweden, who has just released a book National Intellectual Capital: A comparison of 40 countries which ranks countries according to how well knowledge and human capital translates into economic development and prosperity. He believes investing in intellectual capital can ensure not just economic growth but quality growth that can be sustained. “A country may be wealthy today, but what about tomorrow? Knowledge and human capital must be sustainable,” says Edvinsson “Intellectual capital is much more about quality of education and human experience than the number of people in higher education,” Edvinsson said. In his view universities are important “not as mass education, but as training for the human brain – universities are the back office rather than the front office of innovation and development.”

Intellectual capital is defined as ―intellectual material – knowledge, information, intellectual property, experience – that can be put to use to create wealth (Stewart, 1997) and is the roots for future earning capabilities (Edvinsson & Malone 1997). In the global competition, these features, such as educational system, international trade, infrastructure, and renewal capability affect national competitiveness and constitute the major components of national intellectual capital, namely human capital, market capital, process capital,  renewal capital and financial capital.

Human Capital

The first type of national intellectual capital, human capital, is defined as the competencies of individuals in realizing national goals (Bontis, 2004). According to OECD (2000), human capital consists of knowledge about facts, laws, and principles in addition to knowledge relating to teamwork, and other specialized and communication skills.

Market Capital

Market capital represents  ‘a country’s capabilities and successes in providing an attractive and competitive incentive in order to meet the needs of its international clients, while also sharing knowledge with the rest of world’ (Bontis, 2004).

Process Capital

Process capital comprises the non-human sources of knowledge in a nation. ‘ Embedded in a country’s infrastructure, these sources facilitate the creation, accessibility, and dissemination of information. This type of capital is measured through fair business competition environment, government efficiency, intellectual property rights protection, the availability of capital, the number of computers per capita, the ease with which new firms can be established, and the number of mobile phone subscribers.’

Renewal Capital

The fourth type of national capital, renewal capital, is defined as a nation’s future intellectual wealth and the capability for innovation that sustains a nation’s competitive advantage. Business R&D spending, basic research, R&D spending as a percentage of GDP, the number of R&D researchers, the level of cooperation between universities and enterprises, scientific articles, and USPTO & EPO (patent number recorded in both United States Patent and Trademark Office & European Patent Office) per capita are included in this type of capital.

Financial Capital

The fifth type of national capital, financial capital, is represented by a single indicator: the logarithm of GDP per capita adjusted by purchasing power parity. This is the most common measurement of the financial wealth of a nation.

 

In short, Intellectual capital is future earning capabilities. It is about an opportunity in waiting, about sustainability, thinking ahead and adding value. Consequently national intellectual capital is comprised of the knowledge, wisdom, capability and expertise that provide countries with a competitive advantage over other countries and determine a country’s potential for future growth.

 

Edvinsson  acknowledges  that it is difficult to measure intellectual capital. However, a combination of  the measurable indicators above  that include education, ICT infrastructure, market openness and research provides some pointers he believes.

 

The top 10 nations over the last decade and a half in terms of intellectual capital according to this measure are, in order: Finland, Sweden, Switzerland, Denmark, United States, Singapore, Iceland (until 2008), The Netherlands, Norway and Canada.

 

Both China (ranked 36 in the world on intellectual capital) and India (ranked 40) are relatively weak in education and training, despite recent hype about their higher education sectors. However, China is increasing fast on this measure.

 

The UK is placed  nineteenth and  Ireland thirteenth  in this table, ahead of Japan on fourteenth.

Leif Edvinsson and Carol Yeh-Yun Lin (2010) National Intellectual Capital: A comparison of 40 countries. Springer

Bontis, N. (2004), ―National intellectual capital index: A United Nations initiative for the Arab region‖, Journal of Intellectual Capital, Vol.5 No.1,

 

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