Intellectual capital ± does it create or
Ante Pulic is a professor at the
University of Zagreb, Croatia,
and University of Graz, Austria.
Tel: 00385-1-4875 210,
Fax: 00385-1-4875 211,
Abstract Taking into account the transformation in economic reality towards a knowledge
economy it seems logical that we treat IC as a resource, equal to that land, physical assets, and
®nancial capital. This means that it is not anymore treated as a cost but as an investment. In
order for the new system to be consistent we have to de®ne a new index, namely the value
creation ef®ciency of intellectual capital. Its empirical applications shows that while revenue,
pro®t and GDP may indicate successful performance, IC ef®ciency may indicate the opposite,
that value is being destroyed and not created.
Keywords Intellectual capital, Value added, Resource ef®ciency
Many books and articles have been written about knowledge and intellectual capital and its
role in value creation. As intellectual capital has become such a powerful factor in today's
economic reality, I would like to point out a seemingly common problem. Most economic and
®nancial models treat employees ± the prime carriers of knowledge ± as a cost and not as a
In order to take a step forward it is necessary to de®ne a new status for employees. Employees
and their intellectual capital ought to receive the of®cial status of key resource. This means that it
should be put on the same level as ®nancial and physical capital. This is not a hard thing to do.
If we agree that IC is the key resource of the 21st century and that knowledge is today what
once were land, manual work and money, then it would be only natural to give this resource the
status it deserves: of an investment instead of a cost.
The treatment of employees as investment is the beginning and the end of the knowledge
based economy. In the same way, as in the industrial era, where investments were made in
plants and machines as the base for value creation, today companies invest in employees, who
are becoming the key factor of value creation. This way companies combine the two key
resources, ®nancial capital and intellectual capital, which together create value.
Rational value creation has been the main goal in all economic era and it is therefore the goal of
any modern company, institution, region or nation too. With the same resources a company can
create more or less value. Therefore, the key question of the new economy is how do we know
whether value is created or destroyed, whether enough value is created and whether it is
MEASURING BUSINESS EXCELLENCE
VOL. 8 NO. 1 2004, pp. 62-68, ã Emerald Group Publishing Limited, ISSN 1368-3047 DOI 10.1108/13683040410524757