Reading an intellectual capital statement. Describing and prescribing knowledge management strategies
| Published date | 01 December 2001 |
| DOI | https://doi.org/10.1108/EUM0000000006086 |
| Pages | 359-383 |
| Date | 01 December 2001 |
| Author | J. Mouritsen,M.R. Johansen,H.T. Larsen,P.N. Bukh |
| Subject Matter | Accounting & finance,HR & organizational behaviour,Information & knowledge management |
Reading an
intellectual
capital statement
359
Journal of Intellectual Capital,
Vol. 2 No. 4, 2001, pp. 359-383.
#MCB University Press, 1469-1930
Reading an intellectual capital
statement
Describing and prescribing knowledge
management strategies
J. Mouritsen and H.T. Larsen
Copenhagen Business School, Fredriksberg, Denmark, and
P.N. Bukh and M.R. Johansen
Aarhus School of Business, Aarhus, Denmark
Keywords Capital, Customers, Intellectual property, Accounting, Information, Management
Abstract This paper introduces a framework for analysing intellectual capital statements. It is
suggested that the three-way model of intellectual capital (human, organisations and structural)
can be developed in its descriptive and its prescriptive qualities. Another model is offered which
relate intellectual capital indicators to the firm's knowledge strategy. This IC accounting system
describes the transactions that allow the firm's knowledge strategy to be implemented and it
prescribes an agenda from which it is possible to monitor the effects around intellectual resources,
to qualify and upgrade them and to survey the portfolio of intellectual resources. An example of
Systematic Software Engineering's two intellectual capital statements from 1999 and 2000 is
used to illustrate how intellectual capital statements may be read from this perspective.
Introduction
Published intellectual capital statements are rare documents. Even if Skandia
and Dow Chemicals published intellectual capital statements in the 1990s, there
has been more talk about the possible benefits of such documents than of their
actual content. Several authors (e.g. Bontis et al., 1999; Erhvervs
UdviklingsraÊdet, 1997; Guthrie and Petty, 2000; Harvey and Lusch, 1999;
Johanson et al., 1998, 1999; Larsen et al., 1999, Mouritsen, 1998, 2000; Petty and
Guthrie, 2000; SaÂnchez et al., 2000) discuss new forms of reporting systems,
which include ``non-financial'' indicators. Rarely, however, were these reporting
systems specifically developed as intellectual capital statements. Typically,
they were ``new'' forms of reporting systems generally. There is still a lack of
research about firms that set out to develop intellectual capital statements.
Therefore, there is little analysis of situations where intellectual capital
statements are seen as answers, just as there is little evidence about the
question that makes an intellectual capital statement an interesting answer.
In Guthrie and Petty's (2000) study of Australian practices, the three-way
breakdown of intellectual capital into human capital, organisational capital and
customer capital (Edvinsson, 1997; Edvinsson and Malone, 1997; Roos et al.,
1997; Stewart, 1997; Sullivan, 1998) is used to ``measure'' the content of new
forms of reporting. Using this classification, Guthrie and Petty (2000) suggest
that the indicators used in the statements spread across the three forms of
intellectual capital as 30 per cent human capital, 30 per cent organisational
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capital (internal structure) and 40 per cent customer capital (external structure).
It is possible to count the number of indicators, and this creates insight into the
structure of intellectual capital indicators, but it has limited indication of the
structure of intellectual capital.
It is also possible to aggregate them. Roos et al. (1997, p. 83ff) develop an
IC-index that creates an indicator for each of the three forms of intellectual
capital and an aggregate one, which then can be monitored across time.
Weights have to be assigned to the actual value of each indicator and then the
weighed IC index can be produced. This procedure has merit as it integrates
indicators, but it is an open question how weights are to be found.
It is even possible to simulate and present the indicators in complex graphs.
Edvinsson et al. (2000) show how an IC-landscape can describe the intellectual
capital components in 3-D representations, illustrate the effects of simulations
and use them as forecast information. This procedure allows communication of
the structure of the intellectual capital but it may be near to impossible to find
the model that allows predictions to be made about the states of the indicators.
Whether the indicators are weighed or not, and whether they are simulated
and visualised or not, however, the three-way model neither describes nor
prescribes the development of intellectual resources well since it tends to draw
the indicators away from the context they represent. There is more to an
intellectual capital statement than the indicators. Reading an intellectual
capital is different from reading a financial statement, because the intellectual
capital statement does not have the institutions that make certain readings
conventional, as in the case of the financial statement. The financial statement
is an institutionalised reading of, for example, profitability, liquidity and
solidity. Through history, capital markets have increasingly refined this
reading taking into regard industry-specific influence, firm-specific variance
and the effect of the general economic climate. This is located in strong
institutional contexts.
The intellectual capital statement does not have such institutions. This is
why the indicators in the intellectual capital statement typically cannot be read
as directly and ``easily'' as the ones in financial statements. The logic of reading
the indicators can therefore not be ``outside'' the document but it has to be made
part of it. Roos et al. (1997) say that the measurement of the intellectual capital
and the management of knowledge and information go hand in hand:
``Intellectual capital is concerned with how better to manage and measure
knowledge and other intangibles in the company'' (Roos et al., 1997, pp. 6-7). If
measurement does not make management ± or intervention ± possible there is
no need for it. Therefore, the measurement system needed to probe into
intellectual capital has to be part of an idea of intervention around managing
knowledge (Allee, 1997; Baxter and Chua, 1999; Bukh et al., 2001; Birkitt, 1995;
Guthrie, 2001; Larsen et al., 1999; Roos and Roos, 1997; Ross, 1998; Sveiby,
1997; Sullivan, 1998). In effect, an intellectual capital statement has to be about
a firm's knowledge management activities. How is this possible? How can this
be read from an intellectual capital statement?
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