MEasuRing Intangibles To Understand and improve innovation Management (MERITUM)

The aim of the project was to improve the policy-making capabilities of the European Union in the realm of science and technology policy, and particularly with respect to innovation, by means of providing a consistent basis for the reliable measurements of intangible investments. The specific objectives of the project were the following: a) Produce a classification of intangibles, which is theoretically meaningful and useful for empirical analysis. b) Analyse Management Control systems in order to get to know best practices within European companies in measuring intangible investments, in measuring the outcome from those investments, in using those measures for management decision making and in disclosing them for the use of stakeholders. c) Assess the relevance of intangibles for the purposes of equity valuation in capital markets and d) Produce a set of Guidelines for the Measurement and Disclosure of intangibles which should be useful both for private and public policy decisions. To do so, the project was organised into four activities: a) Classification of intangibles; b) Management Control Study; c) Capital Markets and d) Guidelines. The results obtained in these four activities are summarised next: ∑ Classification of intangibles: Both the definitions of intangibles and classification issues are still very open issues. However from a practical perspective firms seem to group intangibles into Human Capital, Structural Capital and Relational Capital. They also define intangibles in static and dynamic terms, thus distinguishing between intangible resources and intangible activities. ∑ Management Control Study: Several lessons could be drawn from the analysis of both firms with experience managing intangibles and non-experienced firms. Notably for non-experienced firms the external framework conditions and support is extremely important. Sectoral organisations seem to play a major role encouraging the management and disclosure of information on intangibles, especially for SMEs; Education is a crucial element. It is necessary to motivate firms before starting any project; The implementation of a model for the management of intangibles takes place usually in three steps: Identification of critical intangibles, measurement and action; Measurement without action is worse than no measurement at all; Generic metrics do not work for all firms. Specific intangibles require specific indicators; Size is not relevant in the successful implementation of a system for managing and reporting on intangibles. ∑ Capital Markets: The analysis conducted under this activity support the general idea that intangibles are relevant for financial market. Based on econometric analysis, it was found that both R&D and qualitative human resources were related to the value of the companies. Case studies also support this evidence. ∑ Guidelines: The most important outcome of the MERITUM project is the Guidelines for Managing and Reporting on Intangibles (Intellectual Capital Report). They provide the conceptual framework and describe the process to be followed by those firms who want to manage their intangibles and report externally. The Guidelines are the result of all the knowledge generated during the project in the previous activities. The Guidelines were found complete, useful and feasible by a variety of experts: firms, policy-makers, standard setting bodies, accounting and auditing firms, labour organisations, etc. mostly in Europe. MERITUM has become an international reference in the analysis of intangibles. The knowledge generated during the project will be further disseminated and exploited in E*KNOW-NET, a Thematic Network on Intangibles, financed by the STRATA programme, which will be launched in September 2001. More information about the MERITUM project (partners, downloadable documents, etc) can be found in www.kunne.no/meritum. Final Report MERITUM Project 2