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RED DE PROPIEDAD INTELLECTUAL E INDUSTRIALEN LATINOAMÉRICA

PILA-Network is a project co-funded by the European Union in the framework of the ALFA programme

MODULE3 ¡Think Academic – Act Business!

Management of Intangible Assets in

Higher Education



INTANGIBLE ASSETS – AN OVERVIEWWelcome – Warm Up – Overview

2PILA Kick-off Meeting, 19-20 January 2009



Agenda

• General Overview

• Definitions and Concepts• Implications for Management

• Structure of Intangible Assets

• Group Assignment



General Overview



When a university becomes a learning organisation

with shared vision and shared institutional awareness,

with participation by all, a dynamic interactive

environment emerges where the lines between

teaching and learning, and education and training, are

blurred and lifelong education is the norm.

(Childs 2001)



Growing Importance

In 1978, intangible assets were determined to constitute only 5

percent of all assets, while they become 78 percent of all

assets today. Some 50-90 percent of the value created by a

firm in today’s economy is estimated to come from the

management of the firm’s intellectual capital rather than from

the use and production of material goods (Guthrie andYongvanich, 2004).

Source: Chareonsuk and Chansa-ngavej (2008)



Necessity to actively manage IPR

In view of the realities of the present funding system in

higher education and the need to exploit alternative

forms of income, specifically the "third money

stream" (where funds are earned from other sourcesthan students and government). […] higher

educational institutions will be required to exploit

their intellectual property rights to a far higher level

than has been the case in the past.

Kok, A (2007) “Intellectual Capital Management as Part of Knowledge Management Initiatives at Institutions

of Higher Learning” The Electronic Journal of Knowledge Management Volume 5 Issue 2, pp 181 - 192,

available online at www.ejkm.com



Research on Intangible Assets




Definitions and Concepts



Intellectual Assets vs. Intelectual Capital

• According to Klein and Prusak (1994), one can define intellectual

capital operationally as intellectual material that has beenformalised, captured and leveraged to produce a higher valuedasset.

• While many authors use the terms “intellectual asset„ and"intellectual capital" interchangeably, there are subtle differences

between the meanings of the two.• In balance sheet terms, intellectual assets are those knowledge-

based items that the organisation owns that will produce a futurestream of benefits for the organisation. They are the "debits" orindividual items that comprise intellectual assets on the balance

sheet, whereas

• Intellectual capital is the total stock of balancing "capital" orknowledge-based equity ("credits") that the organisationpossesses. Ideally, the total value of intellectual assets should beequal to the total intellectual capital (Lynn 1998).

Kok, A (2007) “Intellectual Capital Management as Part of Knowledge Management Initiatives at Institutions of Higher Learning”



Intangible Assets is more thanIntellectual Property

Epstein and Mirza (2005) defined intangible assets as non-financial

assets without physical substance that are held for use in theproduction or supply of goods or services or for rental to others, orfor administrative purposes, which are identifiable and arecontrolled by the enterprise as a result of past events, and fromwhich future economic benefits are expected to flow.

There are a whole range of possible classes of intangibles, such as:

• brand names

• mastheads and publishing titles

• computer software

• licenses and franchises• copyrights, patents and other industrial property rights

• recipes, formulas, models, designs and prototypes

• intangible assets under development




Characteristics of Intangible Assets

• Partial Excludability – Non owners can not always easily be excluded

– E.g. patent infringment, employees changing jobs, valuation problems,etc.

– not fully controllable assets

• Nonmarketability – Imperfect (intransparent) or non existing markets for trading

intangible assets, e.g. licensing of patents and trademarks,

– Reason is mostly asymmetric information

– Leads to problems in trading on transparent markets and therefore

pricing and valuation problems and increases risk of holding intangibleassets

• Interdependence between different intangible assets – i.e. R&D expenditure and employee competences or brand value (e.g.

Google, Microsoft, etc.)

Source: Lev (2005) Intangible Assets – Concepts and Measurements, in Encyclopedia of Social Measurement



Implications for Management



So what is the problem with Intangibles?

• Measurement problems (mostly benefit or output related)due to fuzzy identification of intangibles

• Valuation problems

– Uncertain future cash flows (from i.e. patents, or an employee trainingprogramme)

– Risky and uncertain future development of intangible assets (How tovalue a brand that is constantly threatened by competitors?)

• So which is the intangible asset we should invest in, in orderto generate the highest return on investment?

• How high is the optimal investment?

ce: Lev (2005) Intangible Assets – Concepts and Measurements, in Encyclopedia of Social Measurement



To Do‘s for universities worldwide

Institutions themselves will have to implement

• Measures to protect, safeguard and market the

intellectual property produced by staff and students;

and

• Policies to ensure that all participants share in the

income derived from intellectual property on a basis

that is fair, equitable and of a nature that encouragesdisclosure of inventions and discoveries.






Measurement Models

According to Sveiby (2004) and Malhotra (2003), there are fourbasic methods to classify measurement models forintellectual capital:

• Market capitalisation method – The difference betweenmarket capitalisation and stockholders’ equity is calculated.

• Return on assets method – Tangible assets and the annualfinancial figures are compared to the industry average. Above-average earnings are then used to estimate the value ofintangible assets.

• Direct intellectual capital method – Components areidentified and valued.

• Scorecard method – Various components of intellectualcapital are identified and reflected in terms of scorecards andgraphs.




Effective Management of Intellectual

CapitalInstitutions of higher learning that manage their intellectual

capital effectively are strategically focused on managing thefollowing aspects:

• Human capital management and measurement

• Intellectual capital asset systems and competitive technology

assessments

• Intellectual property systems

Intellectual capital is of substantial and growing importance ininnovation and productivity growth, organisational

competitiveness and economic performance. Intellectualcapital, which may, include aspects such as R&D, human

resources, organisational structure and processes, andcustomer relations, is often poorly identified and measured.




Elements of intellectual capital

Many practitioners suggest that Intellectual capital consists of threeelements. [See for example Sveiby (1997), Saint Onge (1996), and Bontis(1998).]

• Human capital which includes experience, the know-how, capabilities, skills, and

expertise of the human members of the organisation• Structural capital (or organisational capital)

which includes the systems, networks, policies, culture, distributionchannels, and other "organisational capabilities" developed to meetmarket requirements as well as intellectual property

• Relational (customer) capital which includes the connections that people outside the organisation havewith it, their loyalty, the market share, the level of back orders, and similarissues






Structure of Intangible Assets



Categorization of Intangible Assets




Intellectual capital structure for research

Source: Ramirez et al (2007), Intellectual capital management in Spanish universities



Intangible Assets in Corporations


Based on work of Sveiby (1997), Shaikh (2004)



Group Assignment



Group Work

• Form small groups of 3 persons, ideally from different

universities or departments to get a comprehensive view!

• Identify in your team through brainstorming and discussion

the most important intangible assets in universities

• Note the intangible assets on post-its and stick them on a

piece of flipchart paper

• Try to cluster your intangible assets according to one of the

structures presented

• Your overall timeframe is 20 minutes

• When finished, put your poster up on a wall

– We will go through 2-3 posters to identify the common findings



RED DE PROPIEDAD INTELLECTUAL E INDUSTRIALEN LATINOAMÉRICA

PILA N k i j f d d b h E U i i h f k f h ALFA

Thank you for your attention

www.pila-network.org

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