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Is Investment In Intangibles Really Investment?


The advent of immaterial capital concerning physical capital is ancient and would go back, for some authors, to the 19201s. Since the 1980s, the dynamics of growth and value creation have been based above all on immaterial elements: knowledge, new ideas, contacts, organization methods, etc. Companies have already largely switched to this new model. A breakdown of the manufacturing costs of many products shows that the share of material elements (raw materials, depreciation of industrial equipment) is constantly being reduced in favor of immaterial costs (marketing, services, etc.). Bounfour (2000) asserts that generally speaking, physical goods and equipment tend to see their importance reduced to all intangible activities within companies. Several factors explain this evolution. First, our economies have moved from a logic of reproduction to a logic of innovation, in which it is necessary to innovate, ever more and ever faster, to continue to grow.

The second breakthrough

It’s the technological revolution in information and communication, which is both the driving force and the consequence of the changes underway. Finally, the steady increase in the share of the service sector is also contributing to the increasing dematerialization of our economy. Two other major trends in the developed economies – globalization and financialization – are making it easier for companies to focus on the activities that create the most value, i.e. intangible activities. Intangible investments then seem to have taken a predominant place in the life of contemporary companies.

This observation is all the more confirmed by the different theoretical approaches that have been put forward in both the economic and managerial literature, which provide strong arguments as to the role of intangibles in the economic life of companies. Nevertheless, Kaufmann & Schneider (2004)2 have researched the main publications since 1997 concerning intangible capital, they stated that the literature review clearly shows that most publications in this field still lack theoretical foundations. This paper focuses on the ambiguities facing intangible capital as a scientific discipline from the terminological, definitional, and classification points of view.

The intangible is difficult to identify, apprehend, evaluate and assess.

It is assumed that virtuous behavior can create preference. There is no doubt that organizational agility is an asset for competitiveness. We know that image is essential to the performance of a brand. What are these multiple assets hidden at the heart of organizations? How are they built? Were they imagined, initiated, encouraged? Did we create the conditions for them to flourish? Did we luckily inherit them? Can they be developed? So many questions for managers in this new economy that shifts the center of value creation from physical capital to intellectual capital.
The value of a brand can represent 80% of a company’s assets…

Work on the brand concept has identified its potential. The brand is a construction of material values (name, logo, product reality, point of sale…) and immaterial values (history, community behavior, commitments, aura…). The tangible and the intangible. Today, we know that this value represents, on average, 15% of a company’s assets. And that it can reach new heights for fashion, sports, or luxury brands. That’s the intangible that counts on a balance sheet! And human, social and cultural data complement these valuable assets.

Welcome to quality management!

Would any search for the indefinable be in vain? Would piloting under the right stars be the only answer? Certainly not! Today, there are advanced reflections on the subject. Reference systems, observatories, thematic clubs, expert consulting firms… there are many solutions to improve knowledge of intangible resources. It is possible to identify them and to use classifications and methods to evaluate them. These new approaches thus draw the outlines of modes of governance favorable to the emergence and deployment of intangible assets, such as new accounting approaches, the consideration of extra-financial assets, but also the deployment of policies of well-being at work or the support of public authorities to intangible investment …
A new economy of the immaterial

At a time when digital transformation and sustainable transformation are competing for the priority of strategic plans, it has become essential to capitalize on these intangible assets, and in particular on the resources that enable and support change. But it is one thing to evaluate, it is quite another to inspire all value creators. It is important to be vigilant so that the temptation to rationalize does not mean confining or over-framing positive energies. The intangible can be measured, respected, and maintained. Is it possible to build a charismatic personality or to decree an innovative culture? The management of the intangible must also be that of the sensitive, to be practiced with enthusiasm but without certainties of standardization.

The immaterial capital

Immaterial for a company poses acute problems: on the one hand because it encompasses different notions; on the other hand because it again raises the quarrel between accounting and management. Moreover, it is common to observe inconsistencies in the terminology and the apprehension of the different concepts used. There is currently no very precise and commonly accepted definition of the concepts of investments and intangible assets. This heterogeneity of the available conceptions generates additional complications that slow down the understanding and analysis of intangibles. In this section, we will review the different definitions and classifications in the literature to better understand this subject.

The concept of “immaterial” is delicate to grasp because of its nature and the heterogeneity of the domains it covers. To define this concept we come up against two kinds of problems.

First the concept

The latter is often confused with the notions of “incorporeal “20 and “intellectual “21. The distinction between these two notions is not established. Then the approach to “intangibles” in the literature: different notions are often used (expenditure, investment, assets, capital…). Avril and Dumont (2006) confirm that “the term intangible has an accounting filiation, i.e. it can be found in a company’s balance sheet: intangible assets, which generally include acquired intangibles, such as patents, trademarks, and software, as well as certain internally generated elements such as R&D (under certain conditions).

As a result, a significant proportion of the company’s intangible assets are not or only to a limited extent recognized in the financial statements, such as trademarks and similar On the other hand, the term “intellectual” refers more to managerial and sociological approaches than to accounting and economic approaches.

Caspar and Afriat (1988) argue that intellectual investment is the implementation of global thinking centered on the introduction of intelligence into the different processes of the firm. According to the author, a firm’s intellectual capital is limited to the knowledge and skills of its employees.

Bounfour (1998) confirms that “analysts oriented towards innovation and more general strategy favor the notions of intellectual investments, intelligence investments (Afriat 1992) or intangible investments”. Although the three terms are often used as synonyms, we note that the field of the “intangible” is broader and covers that of the intangible (accounting and normative approach) and the intellectual (a managerial approach based on knowledge or the human dimension).

Definitions of intangible capital:

An accounting predominance The end of the 1980s and the 1990s gave rise to several attempts to define intangible investments. Although they constitute important theoretical contributions, these different definitions are often too general and struggle to provide clear criteria for identifying intangible investment. Goldfinger (1994) confirms that the difficulties of definition reflect the abundance of intangibles. Indeed, borders are shifting and overlap between activities is frequent.

The absence of a universally recognized definition reflects the diversity of the characteristics of intangibles and the complexity of their effects. All the elements of a firm that exist after tangible and monetary assets have been These are the elements which, after working capital and fixed assets. This type of definition has been adopted by several authors. These are non-physical assets that result from legal or contractual rights and that are likely to generate future income”. The author distinguishes two types of intangible assets: – identifiable intangible assets (such as patents); – unidentifiable intangible assets (such as goodwill).

Classifications are a “heuristic tool”, a “construction aid” for interpretation and understanding (Gröjer 2001), and must have a purpose (Rosing 1978). The difficulties of conceptualization and definition, they face a problem of classification.

The concept :

There is no clarity on a general definition of intangible assets and criteria for identifying the different types. On this subject, a growing current in the literature has been interested in the classification of intangibles in the firm. The first works focus on the accounting aspect and are based on an additive approach: the aim is to list a certain number of elements that meet predefined criteria and that constitute the components of an expense, an investment, or an intangible asset.

Four investment categories

intangible investments for innovation: they are upstream of the innovation process. They develop the basic knowledge and skills needed to introduce new products and processes. These investments include R&D, technology acquisition, design, engineering, and observation and operation activities;
qualifying intangible investments: investments in human resources, information structure, organizational structure
market studies: exploration, growth, and organization ;
software: integrated into equipment.

Classification of immaterial according to Diefenbach :

Personal qualities: Tacit knowledge, including qualifications, experiences, skills, and abilities of an individual – individual feelings and values, hopes and goals – health, well-being – workforce – individual competence to evaluate, decide, act and behave – personality – official (legally protected) diplomas.

Qualities shared with others: personal/informal relationships, social norms, feelings and traditions, non-contractual regulatory aspects e.g. trust, commitment, engagement, expectations, obligations, social skills (the ability for discourse, conflict, and cooperation), power and reputation based on personal characteristics;

Attributes that can be shared between two or more people: language, cultural traditions, and heritage, national trait, corporate culture, work climate, informal rules, social norms, values, rules, law, etc.

Role, social position, power, status and position-related influence Rights and duties

Data (symbols, signs), information – explicit knowledge – intellectual property (company name and logo, trademarks, designs, formulas, software, copyrights, patents, licenses, quota domains, Internet, Portals, contractual regulatory aspects of formal relations between the parties

Infrastructure (hierarchies, government, planning, information, communication, coordination, administration and control structures, and processes, supply chains, and distributions) intangible – organizational knowledge and capabilities embedded in technologies and models – knowledge embedded in processed or produced products

An epistemological deal

To make a scientific reading of the theme of immaterial capital, it was deemed appropriate to draw a parallel with the epistemological approach. It should be remembered that the latter can thus relate to several aspects: the modes of production of knowledge, the foundations of this knowledge, the dynamics of this production, its validation, its organization, and its progression.

The first of these obstacles is “the first experience”, that is to say, an experience that is not accompanied by a critical and questioning mind; the impressions generated by our senses and our daily experiences are as many obstacles to a true understanding of the object of our research. The obstacle of the first experience consists in focusing on the impressive aspects of a phenomenon, thus avoiding grasping its important aspects from the point of view of knowledge.

It is suggested that the research theme related to intangible capital is still in this phase of “first experience” which has not had time to mature. The euphoria that reigns around this concept, which borders on the magical, obscures the problems relating to the implementation of scientific assays. The second epistemological obstacle relates to “general knowledge”, which hinders the emergence of precise concepts. General knowledge consists of generalizing too quickly, which makes one lose sight of the essential characteristics of a phenomenon.


From the foregoing, one can deduce that intangible capital as a science, and particularly concerning the conceptual, definitional, and classification axes, is characterized by certain parsimony in the field of research, which is still in its infancy. To date, no consensus has been reached on concepts, definitions, or classification. However, the objectives are converging: company managers, market analysts, accountants, shareholders, and investors need to know how these intangible assets are managed, how they are qualified to be able to evaluate them. Precise terminology and clear identification of the components of intangible capital not only contribute to a better understanding, but also better management of personal, organizational, and societal affairs. The demand for stronger arguments, a rigorous methodology, and consensual standardization in this new field of knowledge is increasingly exponential. The work that has been done, up to now, needs to be supported by in-depth, empirically-based methodologies.

Written by Ottay


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