Intellectual capital: Accumulation and appropriation

Melbourne Institute Working Paper No. 22/02

Date: November 2002


Laurie Hunter


This paper seeks to develop a literature-based perspective on intellectual property from the standpoint of business strategy and strategic human resource management. Distinctive competitive advantage is increasingly built on a firm’s knowledge, one of the principal ingredients of intellectual capital. Competitive capability is strongly influenced by the organisation’s ability to develop, differentiate, appropriate and disseminate its knowledge base. Section 2 identifies the principal characteristics of knowledge assets and explores the means of extracting and protecting the value of those assets, e.g., through R&D, patents and trademarks, licensing and human capital investment. Section 3 reviews the significance of knowledge as a strategic asset and reflects on its growing importance vis-a vis physical capital. However, where knowledge is embodied in people as part of their personal intellectual capital, questions of ownership and appropriability arise in ways that are absent with physical capital. This is discussed in Section 4. Section 5 focuses on the human resource management issues arising from the disputability of ownership of knowledge, especially embodied or intrinsic knowledge. Attention is paid to problems of ‘stickiness’ of knowledge transfer and diffusion, and employer expropriation of value. Section 6 presents conclusions, including reference to the role of governmental agencies concerned with the public interest in the protection of property rights and the social benefit to be derived from advances in knowledge. An appendix briefly surveys three main approaches to the valuation of intangible capital and observes some of the problems posed in the development of effective measures of intangible assets, particularly where these are embodied in people.

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