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| D15: | The Economics of Knowledge Capital | ||
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The data presented here should be seen as the perhaps the most favorable perspective on economic conditions. The Knowledge Capital for large segments of the workforce remains unaccounted for, such as for the government, in defense, in the case of not-for-profit firms, for notoriously under-resourced consumer services and among a rising population of part-time workers.
Ultimately all power derives from the control over resources that are identified either by legal rights or, in practice, as a capacity to extract economic surplus value - profit. “Knowledge”, as an instrument of power is different from all other prior forms of resources, such as control over hunting grounds, agricultural land or industrial capital. Knowledge cannot be measured by conventional means because it is not tangible and remains elusive. It is not reflected in the published accounting statements – the generally accepted current means by which corporations report about their assets. The valuation of a firm’s “knowledge” is also frequently mentioned in shareholder reports but no value ever assigned to it. In this work we present a practical analytic method for calculating the valuation of Knowledge Capital.
| Economic Growth & Knowledge Capital | 8 |
| Measuring Technological Progress | 8 |
| The Importance of Knowledge Capital | 10 |
| Observations | 13 |
| Knowledge Capital Issues | 14 |
| How is knowledge a form of economic power? | 14 |
| Why has knowledge management become important now? | 15 |
| Can knowledge be measured? | 15 |
| What are the methods of measurement? | 16 |
| How does knowledge management affect markets? | 16 |
| What is the significance of the value of knowledge? | 17 |
| What is a knowledge capital ranking survey? | 17 |
| Who should be responsible for knowledge capital? | 18 |
| How do you expect these ideas to be applied? | 18 |
| A Theory of Knowledge Capital | 19 |
| The individual's point of view | 19 |
| The employee's point of view | 20 |
| The corporate point of view | 22 |
| Calculating Knowledge Capital | 24 |
| Valuation Attempts | 25 |
| Market pricing of Knowledge Capital | 26 |
| A Case of Knowledge Capital Valuation: Abbott Laboratories | 27 |
| How to grow Knowledge Capital | 27 |
| Knowledge Capital and Information | 31 |
| Individual Knowledge vs. Organizational Knowledge | 31 |
| Knowledge Capital as Manifestation of Organized Complexity | 32 |
| Examples in Valuation | 32 |
| Knowledge Capital and Spending for Information | 34 |
| Why Employees’ Worth Differs | 35 |
| Investing in people | 36 |
| Software as Knowledge Capital | 38 |
| Insights | 40 |
| Market Valuation of Knowledge Capital | 42 |
| R&D and Knowledge Capital | 45 |
| The Right Ratio | 46 |
| KM, IT and Organizational Capital | 47 |
| Appendix: Knowledge Capital Valuation Methods | 50 |
| Market Value Minus Book Value | 50 |
| Tobin’s Q | 50 |
| Calculated Intangible Value | 51 |
| Baruch Lev's Knowledge Capital Valuation | 51 |
| Paul Strassmann's Knowledge Capital Valuation | 52 |
| Karl Sveiby's Intangible Assets Monitor | 52 |
| Leif Edvinsson's Skandia Navigator | 53 |
| Table 1 - Calculation of Knowledge Capital for Abbott | 26 |
| Figure 1 - Cumulative Spending and Knowledge Capital Gains | 28 |
| Figure 2 - Trend in the Overhead-to-Asset Conversion Efficiencies | 29 |
| Table 3 - High Variability in the Knowledge Capital per Employee | 33 |
| Table 4 - Information Management Spending for Comparable Firms | 34 |
| Table 5 - Stock Market “Bubble” Valuations | 43 |
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