AS A Level Business: Intellectual Capital

• Capital is one of the four factors of production
• Intellectual capital is part of capital
• To reiterate, creating a business (enterprise) involves combining the four factors of production
• These factors are also known as resources
• These resources include capital, land, labour and entrepreneurship
• It is important to note that the word capital does have many meanings
• When we are using it in the context of resources we are referring to “equipment” or all the man-made aids to production
• This includes things like tractors, robots, other machinery, money used to start a business etc
• These days an important form of capital is in the form of intellectual capital
• Intellectual capital can be defined as the collective knowledge and intelligence of the individuals in an organization or society
• This knowledge can be used to:
  • Produce and enhance wealth
  • Gain a competitive advantage over your competitors
  • Spot new business opportunities
  • Solve emerging and existing problems
• Sometimes intellectual capital is used to develop patentable ideas
• Those who wish to use these ideas are then required to pay royalties if they want to use them
• For example companies such as ARM do not actually produce commercial products
• They focus on Research and Development and patent their ideas
• Companies from all over the world then produce computer processors based on ARM’s techniques
• Sometimes intellectual capital is of such importance that it becomes a state secret
• For example, Boeing and Lockheed Martin produce fighter planes and missiles for the US government using classified intellectual capital
• Another example of the manifestation of intellectual property are fashion designs

To access more topics go to the Advanced Level Business Studies page

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