Importance of Intellectual Capital - Essay Example

Intellectual capital produces wealth through information technology and also encourages business leaders to become critical analysts of economic trends specially those factors associated to finance, performance management, production, distribution, marketing and other related exchanges in trade flows, investment, and human resource management. It also hastens wise decision-makings on matters affected by political and market behaviours. These days, business enterprises rely on information capital as technologies have elaborately underscored the role of information, knowledge and experiences for economic activities.

It’s in this context too that the world’s economy transitioned itself from simple dependency on science and technology to an economic system that considered the production of knowledge as primary factors for business management. Nowadays, intellectual capital is considered as the most valuable asset in this era of information. Business leaders would opt for human resources that have strong cognitive skills and the capacity to undertake market research and finance analysis. Moreover, the operation of a corporation require intensive and accurate reporting of all offices or departments to know results and which will form part in the planning for execution, and auditing – processes that are integral to effective corporate governance.

Experts opined that investors and information users would certainly delve into the reasonableness of justification, for instance, in accounting information. The latter is needed for financial and operational decision-making which may cover issues on investments, credit, management stewardship, resource allocation and corporate responsibility. Thus, shareholders would demand documented accounting to determine growth, return of investments, risks, capital gain or profit, for stock options or for rewards.

For monitoring purpose and management concern, quality accounting information is necessary to ascertain collation, litigation, or political costs, including concern for competitive leveraging. Such wide information is required in managing business to enforce regulatory measures to protect and control business interests. 2. Why investors and other information users search for intellectual capital information from other sources? Investors search for intellectual capital to ascertain that their investments will be managed well.

This relates to business sector’s interest to be certain that the company they collaborate or partner with have the capacity to professionally manage assets, real estates, or securities -- which include bond and debt instruments. With financial stability and profits as goals, investors and information users will also be interested that the intellectual capital of the company can wield demanded performance that warrants better if not excellent corporate standing of a company. As such the company will also be evaluating to assess financial viability, to determine business leadership and to secure return of investments.

Thus, for company seeking more capital investments, disclosure of financial status offers corporate reputation; inspire third party certification that will show its compliance or adherence to legal requirements. A corporation with business integrity could assert corporate control