Understanding and valuing knowledge assets: Overview and method

Abstract This paper investigates issues concerning the definition and valuation of knowledge assets. It starts by reviewing several approaches to defining knowledge assets more precisely. These include human resource accounting, organizational learning and intellectual property. Next an inventory is made of how the valuation problem is handled in practice, focusing on corporate practices, venture capital practice and commercial banking practices. From there a new framework for knowledge assets is developed based on relevant differences between human resource assets and intellectual property. Subsequently a method is described for valuing knowledge assets at a level of detail that is relevant for knowledge management. This method uses the added value and the cost of a knowledge asset as the main contributors to value. For establishing the cost of a knowledge asset, use is made of activity based costing. Additionally some limitations of the method are discussed.

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