Knowledge Capital

 About Knowledge Capital.

 

Knowledge capital, also called intellectual capital, is the intangible assets that represents valuable ideas, methods, processes and other intuitive talents that belong to a company.

How it works/Example:

 

Some of the most famous capital is knowledge capital: the secret formula for Coca-Cola or the Colonel's chicken, the design behind the next iPhone, the patent for the Chia Pet, the trademark for the Nike "swoosh" or the code for the next "Call of Duty" video game. These assets all produce significant revenue, and they are all the product of research, trial and error, hard work, and talent, but you can't touch them.

Knowledge capital largely relies on the talents of people rather than the work of machines, which means  companies that want to grow and maintain knowledge capital must grow and maintain talent in their employees.
 

Why it Matters:

 

Knowledge capital can give companies significant competitive advantages. It is hard for competitors to replicate, and it has a long life. For some companies, knowledge capital can be the bulk of the company's asset base or revenue stream.

Like most assets, knowledge capital can lose value as it ages; that is, it amortizes (depreciation is the term used when referring to tangible assets). The rate at which a company chooses to amortize intangible assets may result in a book value that differs from the current market value of the assets. Although the Financial Accounting Standards Board, the Securities and Exchange Commission, and other regulatory bodies define how and when a company’s assets are reported, companies may employ a variety of accepted methods for recording, depreciating and disposing of assets, which is why analysts must also carefully study the notes to a company’s financial statements.

Financialdictionary.com. n.d. [Online]. Available at: http://www.investinganswers.com/financial-dictionary/businesses-corporations/knowledge-capital-6014  [Accessed 18 June 2015].

Social capital

About Social Capital
The central premise of social capital is that social networks have value. Social capital refers to the collective value of all "social networks" and the inclinations that arise from these networks to do things for each other (Hks, n.d.).

How does social capital work?
The term social capital emphasizes not just warm and cuddly feelings, but a wide variety of quite specific benefits that flow from the trust, reciprocity, information, and cooperation associated with social networks. Social capital creates value for the people who are connected and, at least sometimes, for bystanders as well (Hks, n.d.).

Social capital works through multiple channels:

• Information flows (e.g. learning about jobs, learning about candidates running for office, exchanging ideas at college, etc.) depend on social capital.
• Norms of reciprocity (mutual aid) rely on social networks. Bonding networks that connect folks who are similar sustain particularized (in-group) reciprocity. Bridging networks that connect individuals who are diverse sustain generalized reciprocity.
• Collective action depends upon social networks (e.g., the role that the black church played in the Civil Rights movement), although collective action also can foster new networks.
• Broader identities and solidarity are encouraged by social networks that help translate an "I" mentality into a "we" mentality.
  (Hks, n.d.).

What are some examples of social capital?
When a group of neighbors informally keep an eye on one another's homes, that's social capital in action. When a tightly knit community of Hassidic Jews trade diamonds without having to test each gem for purity, that's social capital in action. Barn-raising on the frontier was social capital in action, and so too are e-mail exchanges among members of a cancer support group. Social capital can be found in friendship networks, neighborhoods, churches, schools, bridge clubs, civic associations, and even bars. The motto in Cheers "where everybody knows your name" captures one important aspect of social capital (Hks, n.d.).

Hks. n.d. About Social Capital. [online]. Available at: http://www.hks.harvard.edu/programs/saguaro/about-social-capital [Accessed 28 May 2015]