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Definition, Components and Measurement of Intellectual Capital

Navigasi - One of the most widely used definitions is the definition expressed by Olue OECD (2004) which states that intellectual capital is the economic value of two categories of company intangible assets: (a) organizational (structual) capital (SC); (b) human capital (HC).

Definition, Components and Measurement of Intellectual Capital
Definition, Components and Measurement of Intellectual Capital


More precisely, SC refers to things like proprietary software systems, distribution networks and supply chains. While HC includes human resources within the organization and resources outside the organization such as consumers, partners and suppliers.

IC measurement methods can be grouped into two categories, namely: (1) categories that do not use monetary measurements, (2) categories that use monetary measures. The second method includes not only methods that attempt to estimate the money value of IC, but also derivative measures of the value of money using financial ratios.

Based on the explanation above, it can be understood that the definition of intellectual capital or intellectual capital is an intangible asset that is not directly mentioned in the financial statements which can be in the form of information and knowledge resources that can function to improve competitiveness and improve company performance.

Capital Intellectual Component


The intellectual capital component consists of two components, namely human capital and structural capital or organizational capital, as for the explanation of the two as follows:

1. Human Capital


Human Capital is Ifeblood in intellectual capital. This is where the source of innovation and progress of a company is created, but human capital is a component of intellectual capital that is difficult to measure. Human Capital is a very useful source of knowledge. Skills, and competencies, in an organization or company. Human Capital is the collective ability of the company to produce the best solution based on the mastery of knowledge and technology from its human resources.

Human Capital will increase if the company is able to use the knowledge possessed by its employees. According to Bontis, et.al (2000), HC is presented by its employees. HC is a combination of genetic inheritance, education, experience, and attitude about life and business. This Human Capital will later support structural capital and capital employed (In Ulum, 2008).

2. Structural Capital


According to Bontis (2000), Structural Capital includes all non-human storehouses of knowledge in the organization. This includes a database of organizational charts, process manuals, strategies, routines and anything else that makes a company's value greater than its material value.

Based on the explanation above, it can be understood that Structural Capital is the ability of a company in fulfilling the company's routine processes and structures related to employee efforts to produce optimal company intellectual performance and overall business performance.

For example: the company's operational systems, manufacturing processes, organizational culture, management philosophy and all forms of intellectual property owned by the company.

An individual has high intellectuality, but if the company has a bad operating system and procedures, the intellectual capital cannot achieve optimal performance and the potential cannot be utilized optimally.

Measurement of Intellectual Capital


The VAIC (Value Added Intellectual Coefficient) method is designed to provide information about the value creation efficiency of the company's tangible and intangible assets. VAIC is an instrument to measure the performance of the company's intellectual capital.

This method is used to measure the efficiency of intellectual capital and capital employed in creating value based on the relationship of three main components, namely: (1) Human capital (2) Employed Capital, and (3) Structural Capital.

The model starts with the company's ability to create value added (VA). Value added is the most objective indicator to assess business success and shows the company's ability to create value.

VA is calculated as the difference between output and input. Output (OUT) represents revenue and includes all products and services sold in the market, while input (IN) includes all expenses used in obtaining revenue.

The important thing in this model is that the labor expense is not included in the IN. Due to its active role in the value creation process, intellectual potential (which is represented by labor expense) is not calculated as a cost and is not included in the IN component.

Therefore, the key aspect in Pulic's model is treating the workforce as a value creating entity (Ulum, 2013: 192).

The formula for calculating Intellectual Capital is:

VA= OUT - IN

Information

VA = Value Added Company.

OUT = Total Sales And Other Income.

IN = Expenses and Expenses (Other than Employee Expenses) (Ulum, 2013: 192).
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