Characteristics of Intellectual Capital

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Although Intellectual Capital is similar to tangible assets in its potential for generating future cash flows, it is radically different from tangible capital in the following respects: • Intellectual assets are non rival assets. Unlike physical assets which can only be used for doing one thing at a time, intellectual assets can be multiplexed. For example, a customer support system can provide support to thousands of customers at the same time. It is this ability to scale with need that makes intellectual assets far more superior to physical assets. • Human Capital and Relational Capital cannot be owned, but have to be shared with employees and suppliers and customers. Growing this kind of capital therefore requires careful nurturing. • Structural capital is an intangible asset that can be owned and controlled by managers. However, it cannot be traded easily since no markets exist for this purpose. Moreover, Customers do not care about the Structural capital of their Suppliers since every one likes dealing directly with real human beings rather than with systems. • Structural capital, in the form of just-in-time procurement processes and real time inventory control systems can be substituted for expensive capital expenditure such as storage warehouses. Hence the knowledge economy has opened up opportunities for every firm to explore whether inexpensive intangible assets can do the work of costly physical assets. • Firms that leverage their intellectual capital to do knowledge work are able to generate higher margin of profits than those who provide mass-produced solutions. • Human, Structural and Relational Capital often work together in judicious combinations to give rise to core competencies that assume strategic significance. Hence it is not enough to invest in people, systems and customers separately, but in combinations that produce end

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