A Taxonomy of Intellectual Capital and a Methodology for Auditing It

Ownership of intellectual property is rarely measured. While many companies spend huge amounts of money filing and protecting patents, too often that activity is defensive. Patents are not exercised and do not generate wealth for the inventor. Their windows of opportunity remain a mystery to their owners, as does their value. Organisations that are unaware of the value of their intellectual property are missing an important asset that ought to be included in any exercise which aims to measure the value of the organisation.

Other intangible assets such as know-how, customer relations, networking infrastructure, business processes and so on, which also add value to the organisation, are neither measured nor their growth monitored and nurtured as part of a corporate growth strategy. These elements are collectively referred to as Intellectual Capital (IC).

Organisations that would agree that the above mentioned intangibles are valuable, are unable to record, measure and audit their IC, due to the absence of a taxonomy for Intellectual Capital and metrics with which to measure it. This paper discusses these issues and proposes a Taxonomy of Intellectual Capital together with a methodology for identifying and valuing it. It discusses mechanisms and tools for locating and identifying IC within the organisation, together with a means for designing and maintaining the IC Knowledge Base. Finally the relationship between corporate goals, Intellectual Capital and the ability of the organisation to succeed is discussed.

Publication(s)

17th Annual National Business Conference, McMaster University, Hamilton, Ontario, Canada, January 24-26, 1996