Intellectual Capital and Globalization

L. Qoqiauri, Doctor of Economics, Professor

Global economy and market – Global economy cleared the way for the enterprises to the international markets.

The ability of markets of joining different cultures gives rise to the demand in symbols, for giving the buyer ability to identify the producer, notwithstanding the his nationality and the spoken language. Trademarks, for example, Mercedes star at the car bonnet, are more valuable for the enterprise, then the blocks of factories, as they can always build them, while creation of the trademark may take many years. Well-known trademark – this is the desired target, while a factory is only an instrument for producing those transport means, on which this trademark must be placed. In other words, value of the industrial capacities for the enterprises is less, then that of immaterial assets.
According to the involvement of computers and information technologies, the nature of the enterprise itself has been changed. We do not use the methods and abilities, used by our ancestors in the past for attracting clients and providing services for them. Mentioned abilities have been formed by the influences of information and telecommunication technologies, which themselves requested higher qualification of service, which was expressed in the necessity of new knowledge.
New informational technologies in the production were brought instead of not only handwork, but also helped formation of new type of service, which they had only dreamed for earlier. We can represent international banking services as an example, which by using modern telecommunication systems suggests to the clients all kinds of operations depending on the type of credit cards, even buying air tickets. Today people work in the different way. Some of them even have no working place in their ordinary understudying, but work at home and get in touch with managers of a firm and colleges via computer. Such “telecommunication” services save important amounts to the enterprise, as they do not need offices, conference halls, they do not go to the work from one end of the city, to another, by which they save time and money. For provision of such form of interdependence, appeared such specialists with new abilities. These are people, to whom computer is indivisible part of their life and business. Of course, their qualification took large period. They contact their clients and suggest them commodities and services by computer. Databases enable such people to gather information about commodities and service needed by the clients. Computers control expenses of the clients according to the credit cards and give opportunities to pay attention to their purchasing abilities and changes in them.
All said above point to the high share of the human activity in the intellectual capital.
General structure of intellectual capital – Prior to present days, the volume of intellectual capital was defined by the results of scientific-research activities and constructive decisions. Only these assets defined the concept of intellectual capital itself. Under the modern conditions, it would be improvident to stop at this tight understanding of intellectual capital. Turbulent environment encourages enterprises and organizations to search for other important forms of producing immaterial assets.

Companies of the third millennium are considerably different from their predecessor ones. The most important valuable for them is the serving personnel – more specifically, its knowledge and experience. If companies encourage and support initiatives coming from its staff, then the so-called “complex of collective knowledge and abilities” will become a considerable advantage against competitors.
Another important immaterial asset of intellectual capital, as we have already mentioned, may be the trademark, which is the mean of the company identification. It may sometimes appear to be more valuable then the enterprise capacities are. Immaterial assets also are the consisting part of the intellectual capital, which cover different now-how, patents and copyright. Often it is difficult to protect these assets from outer competitors, as the competitor companies try to enter databases of other ones and use their assets.
The fourth constituent of the intellectual capital touch upon the issue of the infrastructure assets, which covers technologies, methods and those processes, without which working of the enterprise would be impossible. Here is the so-called corporation culture, methods of risk estimation, methods of managing trade personnel, database of the market and such communication systems as e-mail and telecommunication.
Role of intellectual capital in attaining the corporate targets – Intellectual capital exists from time immemorial. It has been formed when first strolling trader established good relations with the buyer. During these two millenniums, great revolution took place in the technologies and techniques, in the information technologies and communication system as well. Consequently, some new instruments forming world economy were created. They were not presented in the past, but today they have been established already. Companies cannot function without them. Their existence guarantees specific priority. Therefore, it would be fair to consider them as assets.
Consequently, intellectual capital is a term, which means immaterial assets, without which the company cannot exist nowadays.
Consisting parts of the intellectual capital:
Intellectual capital necessary for the production process may be divided into four parts:
1. marketing assets;
2. intellectual property as an asset;
3. human assets;
4. infrastructure assets;
The said above may be expressed schematically in the following way:
Marketing assets – Marketing assets are those, which are formed at the market of the company for good relation with clients and appropriate position. The marketing assets cover: trademarks, reputation, permanent clients, channels of distribution, appropriate license and other agreements, which give competitive advantage to the company. Exactly due to marketing assets, companies are sold at a higher price rather then their actual capital value is. Clear example took place in 1987, when the company “Nestle” purchased assets of the company “Rowntee”, at twice more expensive price of 3.8 billion dollars.
Intellectual property – Type of property, which is purchased as a result of mental property and which is protected by the law. This term, as a rule is used towards patents, copyright, trademarks and now-how. Laws regulating the mentioned relations differ in the different countries, but their characteristic features are the same.
Infrastructural assets – Infrastructural assets are so-called “crystal boundary” of the organization, i.e. “welding factor” of the company’s staff and current processes. A company, with undeveloped infrastructure, incurs risks such as the problems in the fields of the produced goods and services. At the same time, its staff becomes disoriented and may loose interest towards own investment activities.
Comfortable infrastructure concerns the following elements: philosophy of managing, information technologies, network connection systems and relations with financial communities.
Allow me to discuss each of the above mentioned in details, separately.
Marketing assets – Marketing assets are the potential, which is guaranteed by immaterial assets related with marketing operations. For example, different titles of commodities, purchasers, which are inclined towards purchasing commodity on the basis of this trade-title, repeating of the agreements, portfolio of orders, channels of distribution, different contracts and agreements, as licenses, franchising and others.
The essence of marketing assets – Essence of marketing assets consist in the following, they guarantee competition priority of the company in the existing environment. Existence of trade title means distribution of original commodities to the buyers, its inclination to buy a production of definite trade title, guarantees permanent selling, the result of which is a profitable result of orders. Processed channels of commodity distribution give guarantees for servicing every potential client and it is the means of guaranteeing the maximal profit from selling and service. Advantage conditions of contract gives opportunity to use such service, as advertisement and trade mediating under profitable and guaranteed conditions for the companies, that gives the company priority towards those competitors, which have no possibilities of using such privileges.
Marketing assets are guarantees that the client interested in a company will be aware of its peculiarities and types of activities. Time to time every company may make a mistake in its marketing strategies and give rise to the misunderstanding at the market. This gives a negative effect, as the client, who is in misunderstanding, postpones purchasing up to rather appropriate time. Processing of effective strategies at the market according to representing one guarantees, that when the corporation title is mentioned, the buyer will imagine exactly what will be profitable for this firm. Too large amount of financial means are spent on advertising campaigns, in order to strengthen the position gained by the company with struggling on the market.

Intellectual property as assets – Intellectual property concerns now-how, trade secrets, patents and other property rights. Its consisting parts also are trade and service marks. Some companies’ register thousands of patents annually, most of their part does not enter the markets.
The essence of intellectual assets – Intellectual property represents a legalized instrument for protecting different corporation assets. For example, patented new decisions concerning production and its constituent components. Value of the patent consists in, that it gives its owner a monopoly for production for 17-20 years. The term varies in different countries. Patent differs by special value, if it protects the product itself, as in this case nobody has the right of copying this production. In addition, musical compositions and program provision are protected by copyright.
Such market asset as original name is protected by goods and services trademark. Finally, trade secrets are protected by agreement, which does not allow to reveal the secret. The parties take obligations of keeping the secret. The secret may be revealed only to the parties pointed in the agreement. To tell the truth, the best way to keep the secret is not to reveal it. From this point of view, the most attractive secret is Coca Cola’s formula, which in known only to two people, but each of them is aware of only half of the formula.
Human assets – Under human assets, it is meant totality of collective knowledge of the persons participating in the production, their creative abilities, also problem solving abilities, managerial and entrepreneurial behavior. Here we can add psychometric information and data about behavior of the separate persons in different situations, for example: in strained situations and while organizing the work by group of people. We try to consider a person not only as the instrument providing definite work, but also as a changing system, able to learn different types of activities in a definite period. Objective of a good manager consists in elaborating the mechanism, which gives each employee opportunity for complete realization of own potential within the bounds of the given organization.
The essence of human assets – Human assets are the features characteristic only to people. A question about importance of the worker in the production might seem senseless, but it is worth of considering. There is no enterprise, which could work without a single worker. Differently from marketing, intellectual and infrastructure assets, human assets do not belong to the enterprise. Hence it follows, that the entrepreneurs must have a special attitude towards them, though it is not always so.
Hiring, teaching and ensuring workers’ intellectual development are expensive activities. In addition, the employees has a right to quit the job, he/she may become ill, rest and also harm him/herself by entertaining and wasting time in vein. Together with gaining experience, workers turn into high-qualified specialists, spread their knowledge and become employees that are more valuable. However, knowledge accumulated in the head of the independent person, belongs to this person and not to the company. Therefore, it is necessary to understand the essence of individual person’s ability of acquiring knowledge and definite features. Only in this case, it is possible to understand the concrete worker’s value for the company and a role given to him/her in this company. The best situation for the organization is to acquire knowledge, which gives the opportunity gain maximum profit from the work done by the employee. The employee in remuneration for the provided work must receive salary and moral encouragement. The worker must be given opportunity for professional and personal growth. However, one should think not only of the expenses, but also about has the enterprise of the third millennium enterprise the right for not doing this.
Infrastructural assets – these are those technologies, methods and processes, which enables the operation of the enterprise. For example, corporative culture, methods of risk estimation, methods of managing trade personnel, financial structure, databases about wholesale and single purchasers, such systems of communication, as E-mail and TV conferences. Saying in few words, all the things that create the fundament of the enterprise. In this case we mean not material values, which create computer system, but character of functioning of such system in the enterprise. A good example for this is Internet. Internet is available for everyone and as the internet-space is not somebody’s property, it is less expressed in the accounting balance. Though Internet has ability of selling commodity, on the basis of which the enterprise develops additional channel of distribution. Consequently, Internet belongs to the department of assets. Such assets are used by every enterprise, but each of them has own ones and only serious research reveals their actual value for the enterprise. Unfortunately, companies apply for their infrastructural assets only in the critical situations and companies have careless approach towards them. They are not considered as the active structure, which makes organization stronger and more effective.
The essence of infrastructural assets – Essence of infrastructural assets lies in their ability to ensure orderly, reliable and high quality functioning of the enterprise. They create environment, where employees of the enterprise work and interact with each other. It is necessary to deliver importance of infrastructural assets to every employee, in order to make them understand what the company expects from them in specific situations and what should be their contribution in achieving corporative objectives. We must not consider infrastructural assets as our permanent property. There is no doubt that they should be subjected to adjustment, in order to bring them to conformity with the market and inner organizational situations. Enterprise that does not regularly inspect and estimate the meaning and effectiveness of infrastructural assets of the company, looses priority that enabled it to hold a leading position in the market.

The essence of intellectual capital – For about 100 years ago, labor was valued very inexpensively. The buildings, equipment and liquid assets defined value of the enterprise. During the third millennium, work will cost quite expensive. Human assets, which are necessary for functioning of the company, will become expensive and rare commodities. Creation of valuable market infrastructural and intellectual assets may take many years. Many companies, especially those providing services, have no need of material assets in large quantities. Computers, communications and knowledge – these are basic facilities needed by the third millennium company. Market becomes more and more homogenous, but this is not an outcome of one company’s activities. Such state was encouraged by wide spread of communications and informational technologies in the companies, which do not stand still and develop constantly. Market is widening its boundaries. Brand awareness of some trademarks in the beginning of the century was limited to specific territory, but now it is far-famed all over the world.
Twenty years ago, we were not interested in the problem of intellectual capital. Today, its permanently increasing importance reveals dependence of the organization upon intellectual assets. Companies of new types are created every day, which exist only on the basis of intellectual assets. They produce immaterial products, which are spread electronically, via Internet in the “trade space”. These are the companies, basic resource of which is the knowledge. Their products exist in the digital forms and they may be called the companies of the third millennium. The world changes all the time and we are facing new objective of finding new methods reflecting these changes, for managing and monitoring enterprises.
Intellectual assets – Such kind of property, which is created by mental activities and is protected by the law, belongs to the intellectual one. This term is usually used with patents, copyright, trade marks, production secrets, original technologies and now-how. Laws, which regulate intellectual property relations, differ in various countries, but their basic peculiarities are mentioned below.
A patent – is the proprietary right, which is awarded by the government to the inventor. This is a special right, which means, that the owner possesses its monopoly during definite period, also one has the right not to allow copying, using or selling own production to other subjects. However, for getting patent it is necessary to introduce the invention to the society. Notwithstanding the patent priority, which consists in its warning “don’t come closer”, it has also a disadvantage – the invention is not a secret.
Existence of the patent in the case of the owner’s active work is very valuable. A patent is a kind of right and these rights must be definitely used. If the owner does not use his/her rights, then it becomes tempter to possess it for others. While creating new product organizations try to protect the created product by large number of patents, for reflecting every part and detail of usage, (this is called “combination”). For example, a photo camera “Kodak Instamatic” is protected by the combination of patents, which consists of more then hundred ones; as a result, it became impossible to copy this product by the competitors.
If the company decides to sell a license for using his/her invention to another market subject, then he/she gains market asset – an income, which is received by the license agreement. A patent is valuable only in the case of its permanent usage and protection, while the companies, which ignore encroach of their right to a patent, loose not only income from the license agreement, but also devaluate their intellectual assets. Cynics may say that a patent worth exactly what the organizations waste for its protection. Somehow, this point of view is correct. Those enormous amounts, which are spent for protection of the valuable patents, speak for this. Unused patent worth nothing and brings nothing.
Altruist inventors in most cases prefer not to assign patent and make their invention available for the society, i.e. give to everyone opportunity of using it. Honorable behavior sometimes led the invention to the opposite result. In the case of absence of guaranteed monopoly, the companies may refuse financing commercial production of the commodity, having fear, that the stronger competitor company will receive whole income. It is historically proved that it happened with the Penicillin affair. Alexander Flaming was its inventor and he decided not to register the patent. As a result, the medicine appeared at the markets very late. The companies did not want to invest financial means in the Penicillin production. If managing of the patent portfolio is provided correctly, it becomes an asset. Let us assume that the patent is registered to counteract the competitor in entering the market with new product, fro example to impede the investments, which were to be placed into the commercial production of the medicine. When abuse of patent occurs, punishing activities must be immediately provided. If it does not happen so, the patent looses its value.
Sometimes, the organization, which owns the patent, does not use it appropriately, but we must not forget that financial income made with the help of the patent, is being reduced when the terms are out. According to this, copying of the product becomes possible. Patent is considered a potential valuable if needed attention is paid to it.
A copyright – The copyright protects an idea from being realized and not the idea itself. The protection starts from the moment, when idea is given a material face, for example, a form of a letter. In some countries, for example, the USA, copyright may be notarized. The time, during copyright is valid, varies in the different countries. However, as a rule, it is valid through whole life of the author plus 50 years.
A copyright is usually given to the author of literary work, movies, choreographic plays, and art, graphic and musical compositions. The copyright may also protect computer provision during the last years.
The copyright is doubtfully an asset, as its owner can sell the creation, spread it, give license on it and this way increase own welfare. For example, the writer may give the publisher right for publishing the work, finding markets and receive honorary for this.
Trademark rights – Trademark protecting conditions varies in different countries. Therefore, we it is essential to be aware situation in this field, in the markets, where we represent commodity and service. According to the peculiarities characterizing the country, we can use different means. For example, in the Great Britain trademark may be protected by two methods: appearance registration itself and trademark right. The registered design or design patent – it is a monopoly on appearance of work or numbers of works, upon which the given registration touches. A patent in this case protects innovations of the design, which gains the buyer’s attention. A design right protects as an original design, so extended face of the work, also a special right of the owner for the cycle of the original design.
As the Great Britain is the member of European Union, main goal of which is bringing the law into conformity with intellectual property, we will foresee changing in this direction.
Commodity sign – Commodity sign is registered notification, which the consumer associates with the company or its commodity. Commodity sign distinguishes the company from other ones. It may be expressed by a word (for example by a company name), by a drought, logo or some other ones. The company gains exclusive rights on commodity signs by its using for a long period and it may be registered in the patenting department. Patenting signs protect commodity of the firm and represent very valuable assets for a long period, their value is being grown time by time.
Service signs – Service sign looks like the commodity one. Distinction is that it distinguished service of one company from another one. Like the commodity signs, registration of service signs is also possible. It is also possible to buy exclusive rights on service signs, which are used for a long time.
Production secrets- Production secret is information, which is not possessed by other representatives of this field. It may be unpatented inventions, new data, new discoveries, technological processes and others. Production secrets belong to the protection means, which is realized by putting confidential agreement or putting agreements of nondisclosure, in which the contract time and conditions of nondisclosure are mentioned. Sometimes companies prefer to give the formula or technological process status of production secret, for avoiding its social publishing in the case of patent registration. While choosing appropriate variant it would be good to define, in what bears higher risk level: patent infringement attempt or disclosure of the secret.
Now-How – now-how is knowledge about definite theme owned by a person. Some knowledge may be defined very easily. For example, knowledge how to run a business. Expression of some knowledge with the words may be difficult. For example how a good wine smells or how a new margarine tastes, knowing of which is necessary for putting the commodity into massive production. Scientists, which have been learning problems of artificial intellect for a long period, lighting up of the questions related with representation of the computer about knowledge of different types. Notwithstanding that, there are some computer systems providing demonstration of realized fulfillment of the work, Now-How remains to be characteristic feature of the man.
Intellectual capital potential to attain the corporate targets – An idea of revision of the intellectual property is not new one, as many companies need data about patents and projects possessed by them, in order to ensure appropriate protection. Though while provision of the protection function departments of intellectual property in the most parts of the companies are considered to be unreasonable from the point of business view, it is important to have information about its potential. It is calculated by different means: possibilities of returning investments, commercial potential, and competition priority and so on are foreseen.
It is important to discuss intellectual capital not only from the position of protection, but also from the point of means, having practical value.