Organisation for Economic Co-operation and Development activities on intangibles
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Work on intangible investments within OECD has been launched under in the influence of the French Commissariat Général au Plan in the 1980's, according to two main theories: human capital theory and the theory of innovation and technical change. Today, the interest for intangible investments is now at a high level, with the development of the Knowledge-based economy. Several Directorates work on these issues:
- Directorate for Science Technology and Industry (DSTI)
- Directorate for Education, Employment Labour and Social Affairs (ELSA)
- Directorate for Financial, Fiscal and Enterprise Affairs (DAF)
- Directorate for Statistics
1. Launch and development of the OECD work on Intangible assets
In 1987, a memorandum prepared by the consultant Kaplan has been presented to the OECD Industry Committee. Though this paper was never officially published, it was, according to OECD, "the first effort to establish a general methodology for measuring intangible investment and to use it to make international comparisons". It has had a lot of influence in two ways:
- it has disseminated the approach of using four "core components" of intangible investment: R&D, software, training and marketing;
- it showed that intangible investment had grown more rapidly than Gross Fixed Capital Formation over the period 1974 to 1984.
Following this first attempt of 1987, work continued within OECD:
- In the framework of the Technology Economy Programme (TEP), a lot of work took place and, a chapter of the TEP final report - published in 1992 - was dedicated to intangible investments. One of its conclusions was that the OECD should work towards developing international standards and data;
- In 1991, OECD organised a Roundtable on Intangible Assets to discuss company accounts;
- At the end of 1992, OECD decided to bring together experiences and expertise developed over the last years and organised in December of 1992 a Workshop on the Measurement of Intangible Investment. This Workshop was organised by the Directorate for Science Technology and Industry (DSTI) in co-operation with other OECD Directorates (Education, Employment Labour and Social Affairs ; Financial Fiscal and Enterprise Affairs and Statistics Directorate) and also Eurostat. 27 experts attended representing 15 countries and 24 papers were presented, in particular :
- a draft set of practical guidelines for collecting, comparing and issuing data making maximum use of existing sources (Wim Vosselman - Netherlands Central Bureau of Statistics)
- a paper presenting the coverage of intangible investments (Louis-Marc Ducharme - Statistics Canada)
The Workshop concluded that the work should continue on three parallel tracks:
- in the short term: establishing a manual of practical guidelines for data compilation and comparison using existing sources;
- in the medium-term: improving the conceptual framework;
- in the medium to long term, working towards the development or revision of source surveys.
However, the work on practical guidelines has been postponed. It has been considered that it was necessary to undertake additional research and improve coordination on existing material, before such guidelines could be issued.
- In the following years, work has continued in the framework of several OECD working groups:
- Group of National Experts on Science and Technology Indicators: revision of standards for R&D statistics, new standards for innovation surveys;
- DEELSA work on training statistics;
- Group of National Accounts Experts: application of the revised System of National Accounts;
- Working Group on Innovation and Technology Policy: measures of key aspects of national innovation systems and the knowledge-based economy (KBE).
Also, in 1996, Ministers addressed to the OECD to develop a set of indicators of investment in human capital and its economic and social returns and to identify areas where new data and knowledge need to be worked on. The request reflected a concern about the treatment of expenditure for education and training in public, corporate and national accounts. Following this request the OECD published a report entitled "Human Capital Investment - an International Comparison" in 1998.
Several conferences and meetings took place at which a number of papers were presented:
- Conference on New S&T Indicators for a Knowledge-based Economy in 1996;
- Meeting "Human Resource Accounting in Enterprises: Recent Practices and New Developments", Helsinki, Finland in 1996;
- Accounting for Intangibles, Hull, Quebec in 1996;
- in 1997, "Industrial Competitiveness in the Knowledge-based Economy: The New Role of Governments" in Stockholm.
2. The 1999 International Symposium on Intellectual capital
The interest for intangible investments is now at a high level, with the development of the Knowledge-based economy.
In June 1999, OECD organised a Symposium in Amsterdam in co-operation with the Netherlands Ministry of Economic Affairs and Ministry of Education, Culture and Science, and the Nordic Industrial Fund. Additional support has been provided by the Canadian Institute of Chartered Accountants, The Ernst & Young Center for Business Innovation, the European Commission (DG Enterprise and Education, Training and Youth), and the Institute of Chartered Accountants in England and Wales.
This workshop addressed the technical feasibility of improving the quality and comparability of information on intellectual capital, the demand for higher-quality information, the use of this information and possible strategies for increasing transparency and improving information on intellectual capital.
Bringing together business executives, investors, accountants, governmental officials and others with an interest in intellectual capital, it consisted of two parts:
- a Technical Meeting gathered research teams and companies they work with to consider the feasibility of developing intellectual capital indicators. Researchers and company representatives reviewed results of recent surveys of 1800 companies, and case studies and experimentation in 125 companies in OECD member countries. It was underlined that it is the combination of intellectual and tangible capital of a company that creates value. However, they still are not measured or reported adequately, even if some progress in measurement and reporting by companies has been noted;
- a Policy and Strategy Forum considered policy issues and possible next steps for improving information on intellectual capital. Within this Forum, a broad range of stakeholders from companies, governments, trade unions, accountants, standards setters, and the academic community addressed the question of how to facilitate development of internal and external company reporting of intellectual capital.
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Conclusions of the Policy and Strategy Forum |
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Forum chairman, Stuart Hornery, chairman of Lend-Lease Corporation, drew the following conclusions: 1.The process of value creation in companies is changing. There is a need for better information on intellectual capital, its relation to tangible capital, and its role in value creation. Financial data are evolving, but, alone, present insufficient information. 2. International organisations, governments, standards setters and other stake holders should encourage experimentation that would lead to general principles or guidelines for reporting key indicators of intellectual capital and information on value creation. They should systematically monitor and evaluate the results of such experimentation. 3. There is broad support for the creation of a framework for voluntary compilation at the enterprise level of a number of key indicators using all possible approaches, including company benchmarking. The framework for reporting should focus on areas that matter most to company performance. 4. Employees, suppliers, and customers are involved increasingly in the value creation process. Improvements in reporting should aim to inform them better. 5. There is a need for better understanding of the innovations in reporting. New approaches are moving towards Internet based real-time reporting; greater availability of information means that more information about a company comes from multiple sources. As a result, more internal information is available externally. 6. Businesses are concerned that disclosure of information on intellectual capital and value creation should be useful to business, as well as stakeholders. Many are actively experimenting. It is, however, too early to consider mandatory changes in rules affecting such disclosure. Any requirements need to be mindful of costs and benefits. 7. Participants at the symposium expressed the desire to continue to collaborate on these issues. Source: OECD |
The OECD web site on intangibles contains the main papers resulting from this workshop as well as an extensive bibliography. They are subdivided in Policy Papers, Background Papers and Technical Papers.
List of Background Papers (available on OECD site)
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OECD work on Measuring Intangible Investment |
OECD |
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Intellectual Capital Accounts: Reporting and Managing Intellectual Capital |
by The Danish Trade and Industry Development Council |
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The Value Relevance and Managerial Implications of Intangibles: A Literature Review |
by Leandro Cañibano (Autonomous University of Madrid), Manuel García-Ayuso Covarsí (University of Seville), M. Paloma Sánchez (Automonous University of Madrid) – MERITUM project |
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Human Resource Costing and Accounting versus the Balanced Scorecard: A Literature Survey of Experience with the Concepts |
by Ulf Johanson, Gunilla Eklöv, Mikael Holmgren, Maria Mårtensson (School of Business, Stockholm University) |
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Reporting on Human Capital: Objectives and Trends |
by Mr. Sven-Åge Westphalen, National Expert, CEDEFOP |
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Your Knowledge: Can You Book It? |
by The Danish Confederation of Trade Unions |
List of Technical Abstracts (available on OECD site)
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Steps Towards Reliable Measurement and Recognition of Skills and Competences of Workers |
by Danielle Colardyn |
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Holistic Measurement of Intellectual Capital |
by Manfred Bornemann, Adolf Knapp, Ursula Schneider, Karin Iris Sixl |
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Looking Ahead: An Enterprise Information and Self-evaluation Kit |
by Fran Ferrier, Phillip McKenzie (Monash University-ACER Centre for the Economics of Education and Training (CEET)) |
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Measuring and Managing Intangibles Eleven Swedish Qualitative Exploratory Case Studies |
by Ulf Johanson, Maria Mårtensson, Matti Skoog |
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Mobilising Change: Characteristics of Intangibles proposed by 11 Swedish Firms |
by Ulf Johanson |
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Reporting on Intangible Assets |
by J.B. Backhuijs, W.G.M. Holterman, R.S. Oudman, R.P.M. Overgoor, S.M. Zijlstra |
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Indicators of Human Capital Investment and Outcomes from the American Society for Training and Development, |
by ASTD: Laurie J. Bassi and Daniel P. McMurrer (American Society for Training & Development) |
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Transparency in Intellectual Capital |
by Martin Hoogendoorn RA (Project Manager, Ernst & Young Accountants), Auke de Bos RA (Ernst & Young Accountants), Frits Krens (Ernst & Young Accountants), Wim Veerman RC (Ernst & Young Corporate Finance BV), Herbert ter Beek (Ernst & Young Management Consultants) |
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Norway: Competence Capital |
by Helge Lovdal (Norwegian Confederation of Business and Industry - NHO), Hanno Roberts (Norwegian School of Management BI) |
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Implementing Brand Management in the Japanese Companies |
by Hiroshi Okano, Ellie Okada and Nobuo Mori |
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New Measures for the New Economy |
by Charles Leadbeater, Demos, London |
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Transparency in Intangible Production Assets |
by Drs. J.H.J. Achten, Walgemoed |
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Fund Management, Intellectual Capital, Intangibles and Private Disclosure |
by J. B. Holland, University of Glasgow |
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Accounting for Intellectual Capital |
by Anne Eronen, The Research Institute of the Finnish Economy ETLA and Guy Ahonen, The Swedish School of Economics and Business Administration |
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There is no Accounting for Intellectual Capital in Australia: A review of annual reporting practices and the internal measurement of Intangibles |
by James Guthrie, Macquarie Graduate School of Management; Richard Petty, The University of Hong Kong; Fran Ferrier, Centre for the Economics of Education and Training, Monash University, Australia; and Rob Wells, Knowledge Management Solutions International, Sydney, Australia. |
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A Core Competency Approach to Valuing Intangible Assets |
by The KPMG Vitality Research Team: Drs. Daniel Andriessen, Dr. Ir. Jan Blom, Drs. Martine Frijlink RA, Drs. Inge van Gisbergen |
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Measuring and Reporting Intellectual Capital from a Diverse Canadian Industry Perspective: Experiences, Issues and Prospects |
by Marilyn Miller, Ph.D.; Bonnie D. DuPont; Vince Fera; Richard Jeffrey; Bruce Mahon, Ph.D.; Barbara M. Payer; Allan Starr |
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Measuring Intangibles to Understand and Improve Innovation Management: Preliminary Results |
by Prof. Leandro Cañibano, Prof. Manuel García-Ayuso, Prof. Paloma Sánchez, Ms. Marta Olea |
Activities concerning intangible assets are going-on in the framework of several Directorates and projects.
Public/private Forum on Value Creation in the Knowledge EconomyFollowing the Amsterdam Workshop, OECD has decided to launch a number of follow-on activities. These include a public-private task force "to explore the potential for better communication of how companies generate value (...)". Its purpose is to examine what types of information are being sought after and used by managers, shareholders and other stakeholders and explore how the quality of some of this information might be improved, and how it might be communicated.
The Forum will operate along the following lines:
- Review of methods to assess intangible assets at company level;
- Promoting more in-depth attention for the influence of intangible assets on economic performance capacity (at micro, meso and macroeconomic level);
- Evaluating how a more open external reporting method can contribute to improved valuation mechanisms in the private sector;
- Policy implications, notably how the current preponderance of interest in tangible investments at the cost of intangible investments can lead to distortions on the capital market, depreciations, etc.
The Forum will be chaired by Stuart Hornery. It will work with a group of leading enterprises to identify and develop tools that companies can use to supplement financial statements. This work should help to raise the credibility of voluntary reporting of information on how companies create value.
"In organising the Forum, the OECD will serve as a focal point for research and discussion, and exchange of information on related work by other organisations. It will bring together the leading experts from the public and private sectors including: companies, preparers and users of information, government, regulatory and standards setting bodies, and non-governmental organisations. One of the key outputs of the proposed forum is to act as an international clearing house of information on the national and international projects that are currently underway."
This Forum is coordinated by the DAF Directorate - Unit Corporate Affairs
Activities on Corporate GovernanceOECD has implemented a "Business Sector Advisory Group on Corporate Governance" and more recently a Task Force on "corporate governance" in order to establish a set of corporate governance standards and guidelines. This work looks, among other topics, at the disclosure and transparency at firm level. The "Principles for corporate governance" have been published by OECD. Concerning disclosure and transparency, it is written:
The corporate governance framework should ensure that timely and accurate disclosure is made on all material matters regarding the corporation, including the financial situation, performance, ownership, and governance of the company.
Moreover, OECD has organised in February 1998 a symposium on corporate governance regarding how disclosure can be used to improve the governance of enterprises. The meeting built on the premise that corporate disclosure, a key element of stock-market driven forms of governance, will become increasingly important for many enterprises due to the growth of the international equity markets as a source of company finance. Theme III was dedicated to reporting on intangible assets. Several presentations addressed the disclosure of intangible information, the governance implications of protecting and enhancing intangibles in companies, best practices, public policies implications, etc. This activity is under the responsibility of DAF Directorate - Unit Corporate Affairs. Synthesis notes are available on OECD corporate affairs web site.
Continuation of the work on intangibles at the STI DirectorateGraham Vickery Principal Administrator - Information, Computer and Communications Policy Division and Dr Michael Freudenberg, Economic Analysis and Statistics Division continue to work on intangibles.
New indicators on intangible investmentsActivities relating to statistical indicators governing intangible assets within the OECD member states are expanding. In October 1999, for the first time, the OECD Science, Technology and Industry Scoreboard includes a range of new indicators on intangible investments that better reflect innovative performance and related outputs of a knowledge-based economy.
The Growth ProjectIn April 1998, the Council of Ministers asked OECD to undertake a study of key aspects of sustainable development over a three-year period. In 1999, an Interim Report has been produced where the maintenance of a "capital base" for economic growth has been stressed -i.e. physical, natural and human capital. In particular, human capital is considered as a component of social assets.
Complementing this report, Ministers asked, in May 1999, the OECD to study the causes of growth disparities, and identify factors and policies which could strengthen long-term growth performance. It was asked to study the demands on human capital resulting from technological innovations and the knowledge society.
The Growth project was launched in February 2000. An interim report is being delivered to the 26-27 June 2000 meeting at Ministerial level in Paris on "A new economy?: the changing role of innovation and information technology in Growth". A comprehensive analysis of all factors and policies affecting growth performance will be prepared for the meeting of the OECD Council in 2001.
Training and educationWork on human capital and measuring of knowledge base is an important activity within ELSA Directorate. In March 2000, OECD has organised an International symposium on "The Contribution of Human and Social Capital to Sustained Economic Growth and Well-being", in partnership with Human Resources Development Canada. One aim was to draw on the work already carried out in the OECD on Human Capital Investment to identify possible new areas of research, data development and policy analysis.
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Contacts Organisation
for Economic Co-operation and Development - OECD
DSTI ELSA DAF Growth
project |