Knowledge Capital - Explained
What is Knowledge Capital?
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Table of ContentsWhat is Knowledge Capital?How is Knowledge Capital Used?Knowledge Capital Components
What is Knowledge Capital?
Knowledge capital is the entirety of intellectual capital that a company has which makes up its intangible assets. The intangible assets of a company include processes, ideas, innovations, procedures, expertise, experience, techniques, knowledge, methods and talents that a company has. When the employees of a company have skills, techniques, knowledge and expertise needed for the business operations, it is known as knowledge capital. Knowledge capital is important to the growth and success of every business, the knowledge capital available in a company puts it at an advantage over other competitors in the market. Intangible assets and intellectual capital are other names given to knowledge capital.
How is Knowledge Capital Used?
There are diverse capital needed in a company for its operations and productions. Tangible capital for instance comprises of assets such as land, machinery, equipment and facility. Also, there are three factors of production that every company needs, these are labor, land and capital. Knowledge capital refers to the set of skills, expertise, techniques, knowledge, procedures and processes and employees have that contribute to the efficiency of the organization. Knowledge capital can be high or low, companies work low knowledge capital are often less productive when compared to those with high knowledge capital.
Knowledge Capital Components
There are three categories of knowledge capital, these are; human capital, structural capital and relational capital. Understanding each of these capital is essential and helps in identifying how businesses work.
- Human capital: This refers to capital owned by workers of an organization such as their skill set, expertise, Knowledge, experience, and talents. These forms of capital are not directly owned by the company, rather, it can harness the skills of its operations for efficient business operations.
- Structural capital: This consists of methods, techniques, processes, procedures upon which business operations are based. Also, databases, codes, patents, software, trademarks and other forms of intellectual property that a company has, makes up its structural capital. These forms of capital are non-physical but important in the efficiency of a business.
- Relational capital:This has to do with relationships between different categories of people in an organization. Such as the relationship that exist between coworkers, workers and customers, suppliers and vendors.
How a business deploy knowledge capital goes a long way in whether it will effectively utilize its knowledge capital or otherwise. First, a firm, company or organization must set up a department that will be responsible for how its knowledge capital is effectively used. Maximizing the potential of knowledge capital by a company depends on how its knowledge capital is utilized and managed.