Intellectual Capital

Early Terminology and History

When defining intellectual capital one must articulate it with regard to a set of terms and phraseologies that are often confusingly similar, with each describing a dimension of intellectual capital as seen from the perspective of a particular profession and its body of knowledge.

Intangible assets, goodwill, nonfinancial assets, intellectual property, intellectual assets, and knowledge-based assets are discipline-specific terms that are often used interchangeably and more or less synonymously to refer to what, at its most articulate, has become known as intellectual capital. Intangible assets and goodwill are accounting and financial terminologies that predate the 21st-century understanding of intellectual capital. Such terms are used by accountants and financial professionals to refer to the “intangible” entities or factors of financial analysis that couldn't readily be captured and reported in the traditional documents of financial reporting such as the balance sheet and profit and loss statements. Thus, for example, until the turn of the 21st century, any monetary value allowed to brands and intellectual property was commonly captured as goodwill.

Intellectual property of course has long been recognized in modern law as those ideas, inventions, processes, names, and creations that could be protected and asserted under the law as patents, trademarks, copyrights, and trade secrets. At least since the European Renaissance, the economic and political significance of ideas and inventions has been acknowledged in some form or another, often as business monopolies or commercial grants that were bestowed on a citizen of the realm by a monarch or noble. Near the end of the 20th century, as it became clear that intellectual property had previously unrecognized economic and strategic significance and was thus a business asset that could be deployed to deliver competitive advantage, lawyers and managers began to refer to it in its strategic deployment as an intellectual asset. And soon a new discipline, referred to as intellectual asset management, began to emerge. During the early 21st century, intellectual asset management sufficiently formalized itself to become the topic of numerous scholarly publications, journals, seminars, conferences, and corporate strategies.

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