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Intervention by Denise Caruso Read Intervention by Denise Caruso, Executive Director of the Hybrid Vigor Silver Award Winner, 2007 Independent Publisher Book Awards; Best Business Books 2007, Strategy+Business Magazine

NATIONAL ACADEMIES III: INTANGIBLES AND MACROECONOMICS

by Mary Adams ~ July 21, 2008.
Permalink | Filed under: Hybrid Vigor, Valuing Intangibles.

More of my observations on the U.S. National Academies conference on Intangible Assets: Measuring and Enhancing Their Contribution to Corporate Value and Economic Growth. and the presentations made that day.

The discussion of the challenges and approaches to macroeconomic measurement of intangibles was greatly strengthened by the presentations of perspectives from not only the U.S., from Carol Corrado, The Conference Board and Brent Moulton, Bureau of Economic Analysis, but also from Jonathan Haskel from Queen Mary College, University of London, and Kyoji Fukao of Hitotsuboshi University and RIETI. I recommend the individual presentations for more detail but thought I would highlight a couple points that struck me.

Corrado pointed out that many of the expenditures in intangibles are co-investments in IT. This emphasizes the role of technology as a catalyst for change in organizations as well as a tool for accomplishing that change. Process improvement, increased employee competencies, improved customer service, are all inter-related. This comment was also interesting in light of Wladawsky-Berger’s presentation based on his experience at IBM on the role of intangibles in business.

Using the approaches developed by Corrado, Hulten and Sichel in 2006 on Intangible Capital and Economic Growth, it appears the intangibles investment in the UK and Japan is much lower than in the U.S. But then Fukao dug into the numbers. He pointed out that one component of the calculation of investment in organizational structure is the CEO’s time commitment to corporate strategy. Data shows that, in the U.S., CEOs spend 20% of their time on strategy (versus 9% in Japan). Further, CEOs in the U.S. earn about 10 times more than their counterparts in Japan. So 20% of U.S. CEO compensation will far outreach 9% of Japanese CEO time.

Another difference in the calculations was in the differing role of formal versus on-the-job training. The U.S. tends to use formal training for employees. Japan relies more heavily on informal training. So the U.S. calculation under-counts Japan’s investment of 9% of the average worker’s time in on-the-job training.

These two factors lead to higher calculation of the U.S. investment in intangibles—but I was left wondering whether the U.S. calculation is valid … Another demonstration of the challenges ahead on measurement of intangibles.

1 Response to NATIONAL ACADEMIES III: INTANGIBLES AND MACROECONOMICS

  1. Intangibles at the National Academies : I-Capital Advisors

    [...] Intangible and Macroeconomics [...]

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