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Intellectual Capital

SEE ALSO Investments; Personal Financial Planning copyrights, and other results of human innovation and
thought. Intellectual capital is often disaggregated into
four categories:
BIBLIOGRAPHY
Aizcorbe, Ana M., Kennickell, Arthur B., and Moore, Kevin B. 1. Legally recognized intangible assets such as patents,
(2003, January). Recent changes in U.S. family finances: Evi-
dence from the 1998 and 2001 Survey of Consumer copyrights, and franchises that are purchased
Finances. Federal Reserve, 89, 1–32. 2. Legally salable and protected intangible assets such
American Council of Life Insurers. http://www.acli.org as trademarks, brands, customer lists, and customer
American Council of Life Insurers. (2005). Life insurers fact book orders
[Annual]. Washington, DC: Author.
3. Structural intangible assets such as the systems and
America’s Health Insurance Plans. http://www.ahip.org
databases used within the company; examples of
Baldwin, Ben G. (2002). The new life insurance investment advi- these systems are the information system, account-
sor (2nd ed.). New York: McGraw-Hill.
ing system, purchasing system, and sales system
DeNavas-Walt, C., Proctor, B. D., and Lee, C. H. (2005,
August). Income, poverty, and health insurance coverage in the 4. Human capital intangible assets such as what is in
United States. Current Population Reports P60-229. U.S. the minds of the individuals who work for the com-
Department of Census. Washington, DC: Government Print- pany; an example is the knowledge that researchers
ing Office. in a pharmaceutical company might have in their
First Research. (n.d.). Industry profiles [Excerpts]. Retrieved Feb- minds of past experiments and their results
ruary 23, 2006, from http://www.firstresearch.com/industry-
analysis.asp
SIGNIFICANCE IN
Insurance Information Institute. http://www.iii.org
CONTEMPORARY BUSINESS
Insurance Information Institute. (2004). Top twenty U.S. ORGANIZATIONS
life/health insurance groups and companies by revenues.
Retrieved February 23, 2006, from The nature of business activity in the United States
http://www.iii.org/media/facts/statsbyissue/industry changed dramatically during the second half of the twen-
tieth century. Jobs in service-producing industries
Insurance Information Institute. (2004). Top twenty U.S. prop-
erty/casualty companies by revenues. Retrieved February 23, increased greatly. At the same time, manufacturing, farm-
2006, from http://www.iii.org/media/facts/statsbyissue/ ing, construction, and other goods-producing jobs fell.
industry The U.S. economy underwent a basic change in the ways
National Association of Insurance Commissioners. the labor force is employed. While earlier the most signif-
http://www.naic.org icant businesses were industrial enterprises, with the
U.S. Department of Labor. (2005). Occupational outlook hand- largest segment of the labor force involved in the produc-
book: 2006–07. Washington, DC: Author. tion of goods, in the twenty-first century U.S. economy,
Vaughan, Emmett J., and Vaughan, Therese M. (2003). Funda- employment in service businesses exceeds that of employ-
mentals of risk and insurance (9th ed.). New York: Wiley. ment in the production of goods.
In service businesses, and even in industrial and retail
enterprises, there is general recognition that astute knowl-
Anand Shetty
Edward J. Keller Jr. edge management leads to innovation and value creation,
and therefore company success. Within the workforce of a
company reside the individuals who have the knowledge
that represents intellectual capital.
INTEGRATED
SOFTWARE INADEQUACY OF GENERALLY
ACCEPTED ACCOUNTING
SEE Information Systems; Software
PRINCIPLES
Generally accepted accounting principles (GAAP), which
establish what is recorded and reported in an entity’s
INTELLECTUAL financial statements, ignore an entity’s workforce as an
asset and also ignore most of the other intangible assets
CAPITAL possessed. The stock market analysts, on the other hand,
Intellectual capital is the term used to describe the intangi- appear to recognize such assets in determining a com-
ble assets provided to an entity by its employees’ efforts pany’s worth, as well as a company’s future profit
and also knowledge assets such as patents, trademarks, prospects. Companies in which knowledge is important,

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