Intellectual Capital

Topics: Human capital, Capital, Labor theory of value Pages: 9 (2725 words) Published: April 27, 2013
Over the last decade, increasing interest in Intellectual Capital (IC) has been the core factor it is being developed rapidly (Juma and Paine, 2004; Bontis, 2001). IC was first being acknowledged in 1995 by Skandia when it published the world’s first IC yearly report (Edvinsson and Malone, 1997).

Definition of Intellectual Capital (IC)
There have been tremendously abundant definitions of IC (refer to Appendix 1). In general it may seen synonymous with knowledge capital and asset, intangible and visible assets (refer to Appendix 2). This also includes human capital, information assets as well as the enclose value of organisations (Bontis, 2001; Tseng and Goo, 2005).

Itami (1987) refers IC as organisation’s intangible assets that consist of experience, customer relationship and information, organisation’s repute and culture and intellectual property. This consistent with what mentioned by Stewart (1997) where IC comprises intellectual material that is able to generate wealth. The closest definition of IC would be from Roos et al. (2005) where IC is said to be the non-physical besides non-monetary capitals controlled by organisations that leads to value formation. According to Stewart (1997), there are three components for IC, which are human capital, structural capital as well as relational capital (refer to Appendix 3).

Components of IC
Human capital happens to be the capital, embedded in a person’s mind and stays together in a person. When a worker quits, the human capital that includes skills, innovativeness, experiences, changeability, leadership, knowledge and creativity leave as well (Brooking, 1997; Roos et al., 2005).

Structural capital signifies the supply of knowledge that is organised and available on black and white. This consists research and development (R&D), copyrights, processes, databases and brands. Others would be management systems of information, strategies, organisation culture plus other capitals that possess greater value than physical value (Wall et al., 2004; Roos et al., 2005). All these will remain as organisation’s property and being controlled by them.

According to Wall et al. (2004) and Tayles et al. (2007), relational capital indicates intangibles, which progress over certain period of time between organisations and peripheral groups (suppliers and customers relationships, creditors, repute, customer satisfaction and loyalty along with marketing, industrial and governmental networking.

Impact of IC on Organisations’ Performance
With the emerging of the new ecomony, which is the knowledge-centered economy; IC is regarded as a driving wealth for organisations. Astonishing profits can be gained as the collaborations that occur amid intangibles generate distinctiveness besides wealth to the organisations. Marr and Moustaghfir (2005) claim that any form of intangible supply, knowledge or/and intellectual materials are absolutely necessary in attempting to attain organisational goals. IC not only increases market value but assets as well which illustrated in Appendix 4 under hidden value.

An Overview of the Indian Pharmaceutical Industry
The pharmaceuticals industry is one of the strong players in the industry of knowledge-centered. The development of a drug invention requires US$300 million on average of 8 to 10 years due to the investments made in knowledge generation and learning requires protection such as trademarks and patents and designs along with copyrights.

Till the early of 1970s, most of the Indian pharmaceutical industries were depending on imports and at the same period of time the government has decided to end their dependence on multinational organisations and move towards self sufficiency. The government has introduced the Patent Act (1970) that positioned the base of the new age pharmaceutical industry. The Act does not permit patents on atomic synergy, medicine and agricultural products, which enables Indian organisations to...
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