Intangible Asset Gap in Global Competitiveness: Mapping and Responding to the New Economy [1st ed.] 9783030556655, 9783030556662

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SPRINGER BRIEFS IN BUSINESS

Eskil Ullberg Leif Edvinsson Carol Yeh-Yun Lin

Intangible Asset Gap in Global Competitiveness Mapping and Responding to the New Economy

SpringerBriefs in Business

SpringerBriefs present concise summaries of cutting-edge research and practical applications across a wide spectrum of fields. Featuring compact volumes of 50 to 125 pages, the series covers a range of content from professional to academic. Typical topics might include: • A timely report of state-of-the art analytical techniques • A bridge between new research results, as published in journal articles, and a contextual literature review • A snapshot of a hot or emerging topic • An in-depth case study or clinical example • A presentation of core concepts that students must understand in order to make independent contributions SpringerBriefs in Business showcase emerging theory, empirical research, and practical application in management, finance, entrepreneurship, marketing, operations research, and related fields, from a global author community. Briefs are characterized by fast, global electronic dissemination, standard publishing contracts, standardized manuscript preparation and formatting guidelines, and expedited production schedules. More information about this series at http://www.springer.com/series/8860

Eskil Ullberg • Leif Edvinsson Carol Yeh-Yun Lin

Intangible Asset Gap in Global Competitiveness Mapping and Responding to the  New Economy

Eskil Ullberg Department of Economics George Mason University Fairfax, VA, USA

Leif Edvinsson New Club of Paris Stockholm, Sweden

Carol Yeh-Yun Lin Department of Business Administration National Chengchi University Taipei, Taiwan

ISSN 2191-5482     ISSN 2191-5490 (electronic) SpringerBriefs in Business ISBN 978-3-030-55665-5    ISBN 978-3-030-55666-2 (eBook) https://doi.org/10.1007/978-3-030-55666-2 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

Foreword

This book is about the future. It is about the human capital that people own and access (information, artificial intelligence, AI) which adds to capital and labour and a more dynamic social, economic, and environmental system, that policies must shape. The question of human capital formation points to a shift in the “production mix”, moving from the industrial focus (of capital and labour) to intellectual capital and trade in ideas, based on intellectual property rights, especially patents for its connection to technology. This question has also been accentuated with the increasing calls for de-­globalisation following the COVID-19 crises – although the analysis was done in the fall of 2017 – and requires a new approach to “mapping” of these national and corporate intangible assets (IA), suitable to inform new theories and policies to free up these most sustainable resources of all. The real prospect of reduced trade in goods and services, which is the main source of wealth of most nations today, then only emphasises the importance of IA and trade in ideas. The book is based on a pre-study report of Sweden, the four Nordic countries and three similar small high-education and high-tech countries and points at the need for structural changes, in particular: mapping of national IA in new ways, getting new ideas into the education system to respond to the new economy and coordination of IA management across agencies and firms, as container ports increasingly are being replaced by knowledge ports. The report was funded by Vinnova. The pre-study begins with addressing the Intangible Asset gap in competitiveness for Sweden, then Norway, Finland, Denmark (Nordics) and finally Switzerland, Singapore and Israel comparing their relative competitive positions in a number of IA dimensions. Policy discussions in a new IA era follow. Strategic initiatives to coordinate such policies at national and international levels to close the gap are then outlined. The book ends with the outline of a tentative workshop to begin addressing the issues with across-the-board stakeholders from business, university and government, addressing the structural changes for a more dynamic economic system.

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Foreword

The authors hope that this policy brief can be an inspiration for a discussion on “the IA gap” and the workshop a way to engage a range of stakeholders, especially for small high-tech countries facing increasing global competition. Fairfax, VA, USA  Eskil Ullberg Stockholm, Sweden  Leif Edvinsson Taipei, Taiwan  Carol Yeh-Yun Lin

Preface

This book aims to improve awareness of the value-creating capacity of intangible assets (IA) – skills, intellectual property rights such as patents and trademarks, brands, software, big-data sources, organisational structures and processes, and other assets stemming from human creativity – and alert stakeholders for strategic action. The material, based on a pre-study, already includes implications for strategic initiatives by means of “options” in the form of projects designed to respond to the challenges of, in particular, small countries’ competitiveness in a global world. These options can be prioritised in a follow-on workshop or colloquium including, but not limited to, METI Japan, OECD Paris, World Economic Forum, Ministry of Enterprise and Innovation and other ministries, IP offices, and innovation agencies. All three current top-level international policy dimensions are used to frame this discussion: economic, social and environmental. The understanding of the economic, social and environmental value of intangible assets needs both taxonomy, economic understanding, institutional structure and taxation policy as well as metrics. The pre-study offers emerging research, prototyping and practice insights of the last 30 years on a global scale. One such prototyping activity for IA is artificial intelligence (AI), making an important connection to digitalisation and mathematics as critical future competence areas. Digitalisation may lead to a more unequal distribution of income (see OECD reports), which then may lead to social unrest. Without policy initiatives for equal access to (opportunity for) digitalisation for all, political rest may lead to social unrest. There appears to be lack of awareness also of artificial intelligence – spanning from political to technical processes – where some scenarios estimate that AI may replace up to 50% of both blue-collar and white-collar work. This may shift attention away from economic dimensions to the societal and environmental dimensions as criteria for what can be considered “work”, accelerating long-term unequal distribution through a widening intangible asset IA gap among individuals and countries. A main message in this pre-study is thus that the answer is not necessarily “more resources” – a common political response relying on the same structure – but rather about strategic decisions regarding resource allocation and the development of new vii

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Preface

and innovative structures and new IA resources. This is best done through an ­experimental approach of institutional learning. In an era of knowledge, networks, and circular and digital economies, there is room for many small-country initiatives as well as the promotion of trade in ideas. The strategic conclusion from this pre-study is a proposal of a series of initiatives in the form of concrete projects  – experiments  – backed up by maps and policy discussions covering a range of IA-related topics. Discussion of these strategic initiatives can favourably be initiated in a workshop (colloquium) to identify priority areas for investment and actions in order to retake or advance small nation’s competitive position in IA.

Acknowledgements

This is an awareness book for knowledge navigation. It highlights a longitudinal shift from Trade in Goods to Trade in Services on to Trade in Ideas. A special thanks to Sarah Lidé who contributed to the editing of the initial pre-study report. The book is based on a pre-study of the situation in Sweden, funded by the governmental innovation agency, Vinnova.

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Executive Summary

Intangible assets (IA) and intellectual capital (IC) are not new phenomena – intangibles have been strategic for companies and nations for a number of decades, spurred by the increasing contribution that services make to GDP, in contrast with the previous incumbent manufacturing and agricultural sectors. Some estimate that today, at least two-thirds of company value and national wealth come from IA. Despite IA and IC’s rising prominence in the economy, the awareness and understanding of how these intangibles relate to economic growth has not kept pace. IA includes all non-physical assets of a firm or county, such as intellectual property rights (patents and trademarks, etc.), skills, brands, software, big-data (information on processes, human behaviour and nature), organisational structures and processes, and other assets stemming from human creativity. IC can be seen as a subset of IA with a capitals approach, where market (financial) capital is distinguished from other capital created as a relative measure for firms and nations. The development of appropriate policy measures and management tools for IA and IC, in order to better capture and incentivise productivity gains and value creation resulting from intangibles, appears still in their infancy, both among governments at the national level as well as among enterprises. Most of the current discussion has been centred on intellectual property (IP), which resides on the balance sheet as goodwill and is one of the more explicit forms of intangibles. But IC and IA spans many more dimensions, as this pre-study illustrates, to encompass, among others, human, process, market and renewal capital dimensions (see Fig. 1). A key purpose of this pre-study is therefore to increase the awareness among policy makers, investors and business managers on the importance of leveraging national and company IA for increased and sustainable economic growth. Both a national and firm perspective are taken. The study of countries is a small country comparison (the assumption is that small countries share similar challenges in a competitive world), starting with Sweden. Then we expand to a comparison between Nordic countries – Norway, Finland and Denmark – and finally more globally but still small countries – Switzerland, Singapore, and Israel – when it comes to national intellectual capital (NIC) in a relative country comparison. An international large-­ country summary of company measures then follows, discussing methodological xi

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Intellectual property (inventions, designs, brand names, symbols, etc.) Intellectual Property Human capital

Intangible assets & Intellectual capital

Goodwill

Renewal capital

Market capital Process capital

Fig. 1  IP and goodwill are just the tip of the IC and IA iceberg

issues to capture IC at company levels. The country comparison is described in Chap. 2 through a series of maps developed from a database of 48 indicators across 59 countries over 18 years and the firm method’s overview in Chap. 3. From these country maps, a number of key observations emerge. For one, as of 2018, Sweden is positioned among the top five countries in the world when it comes to NIC. While this strong showing is not to be taken lightly, it masks some underlying currents that point to concerns relating to Sweden’s future competitiveness. When looking at the level of the Nordic countries, Sweden was a NIC heavyweight in the beginning of 2000. However, it has been recently overtaken by its Nordic peers across a number of dimensions. For instance, despite sharing a similar account balance in 2001, Sweden was surpassed by Denmark in this area in 2018. Similarly, Denmark overtook Sweden in 2018 in relation to both government efficiency and research articles, two of Sweden’s strong points, with Norway catching up as well. Sweden seems to also be lagging behind Finland in terms of utility patents, and losing ground to Norway when it comes to venture capital. Taking a more global perspective of other small high-tech nations, Figure 2 provides insight on Sweden’s trajectory over 18 years in terms of renewal capital and GDP per capita, in comparison with Singapore, Switzerland and Israel. Renewal capital speaks to a nation’s capabilities in and investments towards increasing its competitive and sustainable strength in future markets and is a key explanatory factor to a nation’s GDP per capita. As the map tellingly reveals, the trajectories of the four countries are markedly different: Sweden, while improving in GDP, faced a steep backtracking of (relative) renewal capital before remaining relatively stagnant in recent years; Singapore has performed best in GDP growth with a slight corresponding increase in renewal capital; Switzerland has performed the other way around, with a strong growth in renewal capital and a modest corresponding growth in GDP; and Israel, in the early years, shared a similar trajectory with Sweden, but has pulled back and is now improving rapidly in renewal capital, with a slight

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GDP per capita in USD ? 140% 120%

Singapore Switzerland 2001

100%

Switzerland

80%

Sweden 60% 40%

Israel

20% Singapore 2001 Israel 2001

1 Renewal Capital ?

2

3

4

5

6

7

Sweden 2001

8 DATA DOUBTS

Fig. 2  Renewal capital vs GDP per capita (PPP) – trajectories for Sweden, Singapore, Israel and Switzerland. Post 2008 crises, we don’t see much renewal capital developed

c­ orresponding growth in GDP. However, following the post-2008 crises we don’t see any development of renewal capital in any of these nations. This is a sign of concern. Could this be “complacency” in IA-development policies? Sweden has thus come to a set of crossroads for decision-making. Should Sweden decide to do nothing, it runs the risk of continuing to stagnant or backtrack in terms of renewal capital, which in turn may limit its GDP performance in an increasingly intangibles-driven world economy. If it, however, decides otherwise, then it will need to choose if it should replicate the success and trajectory of Singapore in pursuing strong GDP growth in comparison to renewal capital, or if it should instead look to Switzerland and Israel’s examples in focusing on renewal capital in conjunction with more measured GDP growth. Strategic lessons regarding resource allocation and institutional performance can thus be drawn. Sweden’s declining export growth rates in primarily goods reflect the importance of IA see Fig. 3. If we also compare a macroeconomic variable like exchange rates, the currency development may be a result of renewal capital investments, in turn, creating export income from IP. The CHF’s development post 2008 is related in part to its “reserve currency” status post crises see Fig. 4. Chapter 3 then shifts the focus onto how IC and IA, to date, has been applied at the enterprise level. While there are a number of approaches to enterprise IC (positioning, navigating and managing IC), there are a handful of national and regional level initiatives, for example the multi-stakeholder approach adopted by Japan and the government-driven IC Statement initiative in Germany, that have furthered the more productive use, management and reporting of enterprise intangibles. There, however, seems to be a lack of such driving, coordinating and unifying initiatives in Sweden in relation to IA and IC among enterprises.

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Executive Summary

Export Growth Sweden by IP, Goods and Services 10000 +6.6% pa L.T. Goods +3.0% pa post-2008 (-55%)

1000

Billion SEK

+7.5% pa Servies L.T. +6.6% pa post-2008 (-12%)

100

+9.7% pa IP. L.T. +7.3% pa post-2008 (-25%)

1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2028 2030

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Graph: E. Ullberg

IP Services IP post-2008

Goods Goods post-2008 Services post-2008

Source: SCB/Riksbanken

Fig. 3  Long-term and post-2008 export growth rates for Sweden in IP, goods and services

What is clear from Chaps. 2 and 3 is that the IA and IC perspective has to come to bear much more in policy decisions to ensure enduring national competitiveness across economic, social and environmental spheres. Current complacency in national and business policy may be due to the lack of understanding of IA and IC – what they are and how they impact competitiveness – and as such, investments into key strategic initiatives would support the bridging of this knowledge gap and provide a sound basis for informed and forward-looking policy development and decision-making. Also, investment growth in general has been weak after the great recession of 2008, impacting trade growth as investment is a major driver of trade.

The Proposed Initiatives Some of the dimensions that should form a part of this work, as captured in Chaps. 4 and 5, include the impact of COVID-19 (and future pandemics) on trade patterns and their shift towards trade in ideas, thus emphasising IA more than product and services, the implications of digitalisation on IA and competitiveness, IA in relation to the Sustainable Development Goals (SGDs), the impact and role of IA among high-valuation start-ups popularly known as “unicorns”, and even an eye to what emerging superpower China is doing in the field of intangibles as a harbinger of IA and IC’s influence on future global markets and national competitiveness.

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Fig. 4  Exchange rates are typically affected by the trade balance, which may, in turn, be affected by the renewal capital resulting in export revenues from IP

In particular, the calls for deglobalisation after COVID-19 suggest that the digital communication infrastructure will increasingly be used, which means that the opportunities lie in trade in ideas. This appears essential for an economy whose GDP predominantly comes from IA. For small high-tech nations, whose wealth is tied to the expansion of trade, this issue is likely to become a high-priority policy issue that needs to be addressed. Given Sweden’s and many high-tech small countries’ status as a developed economy, the strategic focus should lie in a strategic understanding of where and how to invest a nation’s resources for future national competitiveness, that is a more targeted approach to investing for the future as through the lens of IC and IA. To this end, the list of suggested initiatives in Chap. 6, prioritised according to strategic importance and urgency, provides a good starting point (see Fig. 5). These initiatives, in order to be effective and sustained in their outcomes, should be centred around and driven by the strategic hub, a multi-helix stakeholder approach to coordination with key alliances both nationally and globally. The strategic hub should in turn be supported by the IA Observatory, a future-oriented prototyping “lab” or think tank that generates the knowledge, research and evidence required for strategic prioritisation and informed policy and decision-making.

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Fig. 5  Report overview linked to strategic initiatives related to IC and IA

Authors’ Briefs This section includes the three authors’ briefs focusing on the situation in the case of Sweden. However, similar arguments can be made for many other small countries at the crossroads between complacency and globally competitive initiatives closing any gap in IA.

Creating High-Risk, High-Potential Ideas, by Eskil Ullberg To develop a strategy to remedy the apparent Swedish decline in IA, new steps have to be undertaken. This is a particularly risky and uncertain endeavour. However, risk taking is not something Sweden is known for today. Small and rather safe steps, based on proven concepts, often from abroad, are taken in economics, academia and industry, with only a few outstanding examples in the digital music industry, digital payments and digital communication which have global markets, global funding and globally sourced management. Policies also appear to closely follow European pre-defined paths, rather than reflecting the path-breaking that was created by inventors and innovators funded by a banking industry of the last century, including Ericsson, ABB (ASEA), Atlas-Copco, VOLVO, SKF and many others. This pre-study thus adds to the OECD reports of 2012 and 2016, which were sprinkled with warnings, but unlike those reports, the pre-study does not stop at the analysis. It proposes a future-looking strategy for investment in knowledge building projects that can inform policy capable of retaking lost initiatives. This approach is based on a contribution to the fundamental understanding of the most productive assets today: intangible assets.

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Sweden’s culture of avoiding risk stands in stark contrast with, for example Israel or Chile, who dash out funds to new high-risk, high-potential projects, with few strings attached except “try it”, “learn from it” and “apply again”. In Israel, through the chief scientist’s office, a decision was made that a 50% success rate was acceptable, with the expectation these successful projects would yield a ten-fold return. The other half of “failed” projects would in turn lead to a three-fold return, because these scientists, inventors and entrepreneurs would have learnt important skills – for their next try!1 Chile has a similar system where funds are used to test new things; possibly contributing to that Chile is considered an “innovation hub”, informally coordinating activities across many nations on the Pacific Rim.2 From an economic perspective, the Israeli and Chilean approach solves two problems with respect to risk: trying something new and uncertain where the results may be nil, which will tell others (a social gain) what not to do, and since you can apply again even if you “failed” This rule (an economic institutional issue) thus gives incentives to long-term learning of the “right stuff” needed to ultimately deliver the ten-fold return! Similar examples of strategic use of resources and incentives to learn would be critical for Sweden, and other small countries, to break out of the “irons” and catch new winds on the global markets.3 Extra effort is need for this purpose. “Learning by doing” may then not be enough to improve productivity through a creative and inventive and “disruptive” level, relying on current innovation levels (Arrow 1962). To break out of the irons, new creative and inventive ideas are needed, especially in markets in these ideas, or Trade in Ideas, which are simply too complex to rationalise. Experimenting with new ideas are instead needed and that takes trial and error. Many new ideas of high potential or impact must be tried to discover if they are grains that multiply or simply weeds that suck up the funds. A similar problem exists in Swedish academia where the confirmation of existing theories, rather than the falsification of theories,4 is prioritised.5 The current policy leads to a focus on marginal contributions on existing material, which is publishable and merit building. We all know that this is not how groundbreaking insights – “blue sky” research – come about, but this risk averseness is in academia as well. Theories must be allowed to be rejected if we are to learn something new, and this has to have academic merit as well.

1  Ref. to personal communication with Leif Johansson, the Swedish industrialist and former Preses at IVA, the Royal Swedish Academy of Engineering Sciences, during the seminar titled: ”Global competitiveness and creativity”, Stockholm 22/11/2017. 2  Ref. Personal communication with Amb. Jara, former Vice DG at WTO legal and research. 3  The “trapped” condition a sailing ship finds itself in when the bow of the ship is headed into the wind and the ship has stalled and is unable to manoeuvre. 4  Ref. Karl Popper: A theory should be scrutinized by experiments, rejecting classical induction for empirical sciences. 5  Ref. Communication by Prof. Nils-Eric Sahlin at IVA 27/11/2017.

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What is missing are thus incentives to learn. These require funding of high-risk, high-potential ideas, both academic (science) and industry (technology-inventions). The only way to learn this is by experimenting with a large number of ideas. We need to “water the ground”, not simply do “hard prioritization”.6 We may thus not need a new rational approach to growth, but an age-old understanding of the high risk of ripping up the future before fruition with the rational argument of price (value) equating to marginal cost. In the short term, when all risk is gone, “yes” (for the sake of efficiency), but in the long-term a resounding “NO”. Growth happens only through high risk-taking by real people, taking personal risks with money and careers. Creating a culture of risk-taking would be the medicine for Sweden. (Ullberg 2015, Chap. 5). Practically, to reduce risk in order to spur investment in new ideas, I would also propose the “creative company” (Ullberg 2012) which shifts the incentive from more of the same to more of the new by reducing risk in inventions through zero taxation, setting the goal on technology that can be sold, and making the incentives to invest rationally through high capitalization. Then a research program on risk-taking in Sweden – or any other small high-tech country in need for the same – should be started, favouring falsification as method and learning by trying new high-risk high-potential ideas.

 eading a Weakening IA Nation or at Crossroads, L by Leif Edvinsson If Sweden wants to take a lead in IA and IC, timely and comprehensive mapping of these dimensions is of utmost importance. This pre-study has shown that while Sweden is currently a leader in NIC, its weakening renewal capacity sends an early-­ warning signal of future decline. Further, the impact of the 48 NIC indicators on Sweden’s future outlook is far greater than most realise. For companies, current accounting standards have yet to be universally updated with IA and IC indicators into an integrated new map for enterprises. The taxonomy of these hidden intangible values exists, but is not yet commonly understood and is often mixed up. In turn, while the current hidden value of IA may be an asset, if it is not cultivated appropriately it may develop into an intellectual liability for future generations. For the past 20 years, there has been a growing number of methods and models for IC and IA. These have however not become common practice; a new IA framework for Sweden might be needed. In this area, Sweden can build on prototyping efforts already ongoing in several countries through strategic alliances. The so-called digital economy evolution offers

6  Leif Johansson, idem, on how his “life lessons” can be summed up: don’t prioritize too hard, instead try different things which may work at the end of the day.

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the global ecosystem the opportunity to engage with new trade patterns, for instance the global digital distribution of health services based on life science research out of Sweden. The outlook for trade on IA is most likely going to be reinforced by the emergence of robotics and artificial intelligence. BMW is already in progress with ”cobots” as collaborating robots, which would be, from an IA and IC perspective, human capital in co-creation with robotic structural capital. The key is said to be optimising the equation between human capital and the robot as structural capital, according to an opinion piece by consultant Sara Öhrvall in Dagens Industri (Öhrvall 2017). This may well be achieved with the Chief Robot Officer replacing or challenging the traditional HR function. One thing is clear – business as usual would consign Sweden and even Europe to a gradual decline, to laggards in the new global order. Sweden needs to take bold and decisive measures to ensure it remains relevant and competitive for the future.

 rom the Outside In: Perspectives from a Third Party, F by Carol Lin As an Asian scholar far away from the Nordic region, I have the advantage of observing then speaking as the so-called candid third party. However, I also have the disadvantage of not knowing the local context and historical economic developments sufficiently, thus running the risk of making inappropriate suggestions. My interpretation of the maps is solely based on the data I have at hand, the derived graphs and the comparisons that I found to be meaningful for policy makers. Sweden is definitely still at the top of the NIC world map. However, like an athlete, it is difficult to remain a champion indefinitely, with newcomers constantly aiming to surpass the incumbent. However, Switzerland is a special case and has stayed as a champion for many years, not just in NIC but also in terms of GDP per capita. The motor behind Switzerland’s two-pronged achievement thus becomes an interesting area for Sweden and other high-tech small countries to explore. In the development of this pre-study, I have had the very pleasant experience of working together with the co-authors  – Leif Edvinsson and Eskil Ullberg – who would like to see Sweden maintain and even increase its competitiveness in the global economy. I admire their earnest concern over the potential decline in Sweden resulting from complacency or ignorance of competition from around the corner, especially from certain small countries that have become strong in innovation and R&D. I can feel their eagerness to introduce different models of IA – the source of future competitiveness – so that readers may know how to examine, measure and capitalise on these precious intangibles resources for future national prosperity and well-being. I sincerely congratulate Sweden for having such devoted scholars and practitioners, which will certainly forge the way forward for Sweden to achieve a sustainable national well-being!

Contents

1 Introduction����������������������������������������������������������������������������������������������    1 Part I Maps to Tell a New Story 2 IC and Long-Term Wealth Creation at the National Level������������������   13 3 IC & IA Mapping at the Global Enterprise Level��������������������������������   37 Part II  Policy Discussion in a New IA Era 4 Policy Implications����������������������������������������������������������������������������������   53 5 Discussions of Further Dimensions��������������������������������������������������������   57 Part III  Closing the IA Gap 6 Strategic Initiatives����������������������������������������������������������������������������������   67 7 Workshop��������������������������������������������������������������������������������������������������   73 Part IV Emerging New Trade Structures and IA 8 The Urgency of the Topic of IA for Sweden������������������������������������������   77 Appendices��������������������������������������������������������������������������������������������������������   79 References ��������������������������������������������������������������������������������������������������������   95 Author Index����������������������������������������������������������������������������������������������������   99 Subject Index����������������������������������������������������������������������������������������������������  101

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Chapter 1

Introduction

This pre-study aims to trigger a discussion of small high-tech countries’ strategies for the future, beginning with Sweden given observed indications and resulting implications of policy complacency in an economy relying on intangible assets (IA) for its economic growth. The study has two main angles: a country (macro) and a firm (micro) perspective on the use of IA. It explores what options exist–expressed as projects–to learn about this field in-depth in order to better inform policy. Such a strategy discussion would include the “triple-play” of economic, social and environmental concerns, where the environmental concern ends up in the denominator as an asset. Just like with mining, in the area of IA one has to constantly mine and find new ores to stay in business. In fact, this mining has reducing returns in IA–an exponentially increasing research is needed to sustain productivity–calling for new, more experimental, structures of learning to find new ores1. Although Sweden is the starting point in this pre-study, a comparative study of 7 small high-tech nations is discussed, including the Nordic countries–Norway, Finland, Denmark–and European and non-European countries–Switzerland, Singapore and Israel. Given this broad geographic scope, the study may be relevant for other small high-­tech nations as inspiration for further studies of countries and regions. International initiatives in IA by large firms in large countries–German, Japan, USA–are then discussed and the value of those frameworks for firms in smaller countries. By creating maps to tell a new story, we hope this will stimulate a policy discussion in a new IA era, closing any observed IA gap in competitiveness and overcoming observed complacency in economic, social and environmental agendas. The

 See for example Bloom et.al, 2020, Are ideas getting harder to find?, AER 110(4).

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© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 E. Ullberg et al., Intangible Asset Gap in Global Competitiveness, SpringerBriefs in Business, https://doi.org/10.1007/978-3-030-55666-2_1

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1 Introduction

emerging challenge to global trade, clearly accentuated by COVID-192, is ­challenging small high-tech nations whose wealth is dependent on trade. This will receive a special comment in the last section. The goal of this pre-study has been to discuss these key questions and point at what needs to be done in a broader scope of small and large nations, thus its scope is targeted for a first policy brief.

1.1  Loss of policy Initiative and a New Strategy Response In an IA-based economic system where intellectual property and intangible assets dominate the wealth creation, one needs to be on the top of IA in the world and find unique national specialisation, as no single country can lead in all fields today. This discussion is thus not only about knowledge, but also about the use of knowledge as a productive asset – personal human capital, corporate know-how, national intellectual capital and intellectual property rights – for the purposes of a triple policy agenda trying to integrated economic, social and environment issues. The pre-study starts with the Swedish long-term competitive advantage, a multi-­ generational issue, by comparing its continued development of IA with that of other nations. This requires an understanding of the “map” of where the ores are and what quality they possess. The incentives to mine the most profitable ores – or IA – then rise to the surface of the policy debate. In a global world, this is an incomplete contract3 problem: if we disclose our findings in order to exchange and specialize under contracts where not all contingencies can be specified, for practical purposes, this leaves uncertainty in the outcome of the agreement. This uncertainty needs to be managed by someone for increased growth to take place. According to this theory only high-risk assets would then be suitable for governments to manage whereas all other would be privately developed and managed. One thing is certain, however  – the importance of and demand for different types of IA changes over the decades, which in turn has long-­ term implications for nations. An example here is the telecommunications industry, prominently represented by Ericsson in Sweden, who are among the world experts in radio technology (electrical engineering), now on its fifth generation. However, the phone industry today is dominated by smartphones, which creates the demand for software engineers, an apparently scarce resource in Sweden due to a lack of investment in or late shift towards this area by universities. This may, in turn, be attributed to a close connection between the incumbent industry and state universities, thus highlighting the need to focus on understanding of the dynamics provided by for example the

2  See for example The Economist, May 16, 2020, “Has covid-19 killed globalization?”: Goodbye globalization – the dangerous lure of self-sufficiency. 3  This theory was proposed by Oliver Hart, for which he received the Nobel Prize in Economics.

1.1 Loss of policy Initiative and a New Strategy Response

3

incomplete contract theory. Now, with the advent of 5G, the telecom industry is betting heavily on the Internet of Things (IoT), which entails an extensive reliance on software to enable the communication of billions of entities across factories, ­transportation systems, homes and the world. IoT is further moving to integrate with artificial intelligence (AI), where mathematics is a key area and where Sweden has not ranked at the top for the next generation but possibly is recovering4. This example, with its caveats, shortcomings and nuances that cannot be expressed in an introduction, still illustrates the new challenges companies and nations face when IA is a dominant factor. Here, nations have pursued different strategies: In the US, human capital formation is viewed primarily as an individual financial investment, a private capital, whereas in Germany, knowledge is seen much more broadly as a cultural obligation, resulting in vastly different strategies by governments. Both have the same goal – to expand the triple-policy – but have resulted in very different education systems: one appears more anchored in future creativity building on the past, while the other is anchored in the past to build the future. Such divergent ideas to achieve the same goal are perhaps best reconciled by Sir Winston Churchill: “A nation that forgets its past, has no future.” To begin to address these issues, several maps of seven small high-tech countries fairs in the global competitiveness across several measures of IA have been created. Starting with Sweden, then Nordic, then Switzerland, Singapore and Israel, these maps are the basis for country comparisons in this pre-study. An emerging message from these maps is that over the past decade, despite the public discourse that Sweden is an “IA super power”, Sweden appears to have been falling for the last 15 years from a particularly good position across these IA measures, which may have resulted in important loss of initiatives in policy. If there is a change in trend from the lower levels, which can be seen since 2015, and this trend is sustained, there is an important catch-up strategy work to be done. Similar challenges appear to face other countries. As time-to-market is instrumental in the digital economy, this may be a particularly alarming fact. As this is an extremely complex problem which goes to the heart of creativity, a first measure of static parameters is used to create the set of “maps”. They are based on models initially developed for enterprise use in the 1990s, but subsequently broadened to national level from early 2000s, which now provides long time series of data from a macro perspective. The maps captured in this pre-study reveals the IA gap of countries, in relative measures, and exemplifies changes in position within this select number of smaller countries.

4  See PISA studies for the last decade, where, in 2015–2016, Sweden places itself in the second group (450–500) of math, science and reading, together with Israel. The other Nordic counties are in the first group (>500) with Singapore (#1), Switzerland (#15). In the 2018 and 2019 study Sweden just makes it back to the first group. This is a possible hopeful trend after 15 years of downward slope. Source OECD 2015–2016, 2018, 2019.

4

1 Introduction

This raises the question on how possible links to the triple policy questions can be developed through follow-on projects. These projects will attempt to fill the gap of knowledge between IA and policy, in particular providing a better understanding of some mechanisms through which IA created value and thus competitive ­advantage for the mapped and other countries. The pre-study and follow-on projects may then inform on a preferred road to practical and implementable strategies. To this end we propose the development of frameworks to think about IA and global competitiveness, including projects for further fact gathering. This can be done through stand-alone projects; however, this can also be achieved through a coordination of all facets via a future “laboratory”, starting with workshops based on input from this pre-study and others. The current pre-study thus tries to close both a gap in how we think about the connection between national intellectual capital and corporate intellectual capital, as well as the actual (relative) gap, beginning with Sweden’s position with other countries in the world. In summary, the study will outline initial findings and background material–proposing a number of options for further research projects–intended to inform an updated policy discussion, and enable the retaking of any lost policy initiatives by improving frameworks for approaching IA as well as formulating a global IA strategy for Sweden and similar small high-tech counties.

1.2  Looking at IC from Macro and Micro Vantage Points How are IA then mapped as they touch such a broad rate of strategic issues? We will start with the study of Swedish competitiveness in this introduction, then expand to other small high-tech countries. Intangible Assets, IA  – skills, intellectual property rights such as patents and trademarks, brands, software, big-data sources, organizational structures and processes, and other stemming from human creativity – contribute more to economic growth than other assets. Studies indicate that more than 70% of value created in Sweden comes from national IA, sometimes referred to as national intellectual capital (Lin and Edvinsson 2011). They outperform physical assets by 60% and financial assets by more than 200% (Lev and Gu 2008). Trade in ideas – net royalty payments for use of intellectual property rights (Ullberg 2012) – represent in broad terms a whopping 20% of the Swedish trade balance5. The returns on these intangible assets may be quite substantial and a tangible expression of the knowledge economy. This concept appears to be important in better understanding, by means of a market mechanism, the value of this relatively new economy. These dimensions as well as other emerging themes such as digitalisation in society and the

5  This estimate is based on approximate balance of payment data from 2016. Source: Sveriges Riksbank, SCB

1.2 Looking at IC from Macro and Micro Vantage Points

5

Fig. 1.1  Overall national IC, NIC percentage share of GDP 2011. (Source: Ståhle & Ståhle)

importance of intangibles for fast growing company start-ups such as “unicorns” will be captured in a broader discussion on IA and Swedish competitiveness, outlined in this report from national (economic) and corporate perspectives. A better understanding of the mix of IA at a global level, including both company and national perspectives of such resources, as well as their size, growth and efficiency in a country’s economy, is discussed through mapping and comparing nations in a way that is useful for national policy, companies, as well as education on IA. It is therefore important to explore the potential contribution of such IA to economic growth, i.e. how supply and demand of these assets affect competitiveness of nations. This is a matter of taxonomy and economic analysis, to capture the role these assets increasingly play in value creation in an economic system through firms. In other words, the aim is to increase the level of literacy in Intellectual Capital (IC) and Intangible Assets. From a macro perspective, National Intellectual Capital’s (NIC) impact in GDP formation ranges from 16% to 72% of GDP (see Fig. 1.1). According the same estimates, NIC’s impact on GDP annual growth varies from 0.25% to 2.15%. In advanced economies, close to 75% of GDP growth can be traced back to NIC (based on the period of 2001–2011). One purpose of this pre-study is thus to increase the awareness6 among policy makers, investors and business managers on the importance of leveraging national

6  During a joint workshop with the European Commission on “How patent markets can create growth?”, the number one issue of concern was not any technical issue but the lack of awareness among policy makers and smaller firms on the importance of IP for economic growth (ref. http:// report.ullberg.biz). This “result” has been known for at least a decade (ref. work by Edvinsson, others) thus giving the report some urgency.

6

1 Introduction

and company IA – including intellectual property rights – for increased economic growth. This is not a new issue; it has been around for at least four decades, around the time when services overtook manufacturing and agriculture in terms of GDP contribution, demanding new measures of the intangible assets now dominant in production. Today, at least two-thirds of company and national wealth can be attributed to these “high-octane” assets from human creativity. However, the management of intangible assets and policy for incentivizing the creation of intangible assets resulting in productivity gains–what and how they contribute to value creation and how much–appears still in its infancy for most companies, economists and policy makers. Even at a level of world trade statistics, basically only goods have a good statistics, many struggle with services. The system is triggered by “products crossing borders”. The move from an industrial to a service and IP economy was a paradigm shift that already took place some 35 years ago (this dramatic development is captured in Fig. 1.2, given the currently available data). Now the challenge is for both national and company level policy and decision makers to come to a strategic understanding of intangibles. The proposal is based on decades of work for firms and governments in particular in the fields of intellectual capital (Edvinsson and Sullivan 1996), national intellectual capital (Lin and Edvinsson 2010), and intellectual property, with the latter focusing on patents (Ullberg 2012). The basic division of IC is based on the structure in Fig. 1.3. The initial value scheme of IC, develop initially from a company perspective, was later adopted to a national level with essentially the same structure (see Fig. 1.4). A further development was done in the ELSS model. This latter model is expanded

Fig. 1.2  Trade balance in royalty and services in Sweden

7

1.2 Looking at IC from Macro and Micro Vantage Points

Intellectual Property

Intellectual Assets

Innovation Capital

Process Capital Organisational Capital

Relational Capital

Structural Capital

Human Capital

Intellectual Capital

Financial Capital

Market Value

Fig. 1.3  Intellectual Capital Value Scheme. Model developed by L. Edvinsson. (See for example Edvinsson and Sullivan 1996)

Fig. 1.4  National intellectual capital sums up corporate intellectual capital

into 48 indicators across four categories  – human, market, process and renewal ­capital – and is a static model which estimates these assets as capital. A dynamic model for national IC is still to be developed and is a potential follow-on discussion to the pre-study. The importance of renewal capital combined with structural capital, for, among other things ecosystem impact, is stressed by Ståhle and Ståhle (2012). Based on 2010 data of 59 countries, renewal capital explains about 37.6% of GDP per capita (PPP). As a part of the Digital Agenda initiative, a favourable Internet broadband

8

1 Introduction

environment increases 11.4% of GDP per capita (PPP) together with renewal ­capital. A lower investment risk environment increases 5.2% of GDP per capita (PPP) together with renewal capital.

1.3  Trade in Ideas Impacts the Organisation of Markets A parallel concept concerned with property rights is Trade in Ideas7. This covers both the IP-based trade, like patents, but also trade secrets and other IP bundled in products and services. A trade strategy would offer Sweden increased leverage to human capital formation in Sweden. If we separate out IP from IA and IC, the remaining assets –which includes human capital formation  – then represents the “generators” of tradable IP. Understanding the interaction between these generators of IP and the IP itself is a formidable task well suited to be organized in a more efficient labor market, education system, and international collaboration, in basically all areas where Sweden is not strong. For instance, human capital formation, which is part of IC, goes beyond the linear processes of education, but encompasses the accumulated knowledge and experience of each individual. We therefore need to better understand Sweden’s competitive strengths in terms of such IC generators, for example expertise in audio mixing, radio technologies, etc., their interaction with the IP system, how these aspects impact the organization of various markets.

1.4  Addressing the IA Gap What is then the IA gap for Sweden, the Nordics and other small high-tech countries with respect to global competitors, and what are some key options to better understand this dynamic problem in the light of economic, social and environmental policy challenges? Advancing Theory This pre-study is about beginning to improve our framework for understanding and approaching IC and IA. The pre-study gives a brief but strategic overview suitable for a beginning policy discussion defining areas of further investigation useful to improve our extant frameworks and theory. Some of the projects may therefore focus on data collection and a range of formal models in order to advance theory. To quote American political economist and Nobel laureate Elinor Ostrom: “To explain the world of interactions and outcomes occurring at multiple levels, we also have to be willing to deal with complexity instead of rejecting it. Some mathematical models are very useful for explaining outcomes in particular settings. We should continue to use

7  See www.tradeinideas.com for information on this concept and work to advance trade, statistics, and policy development through field experiments and higher education.

1.4 Addressing the IA Gap

9

simple models where they capture enough of the core underlying structure and incentives that they usefully predict outcomes. When the world we are trying to explain and improve, however, is not well described by a simple model, we must continue to improve our frameworks and theories so as to be able to understand complexity and not simply reject it.”

Characterizing IA and Identifying Research Projects This pre-study therefore has two purposes: characterising IA, including a taxonomy, and the impact of intangible assets comparing Sweden with other countries; and identifying research projects and practical experiment options to better understand the Swedish and other small high-tech countries’ IA gap for competitiveness in a global world. The results of these proposed projects and experiments will then inform strategy for regaining policy initiatives in the area. In summary, the study will be identifying initiatives for research project to: • • • • •

Advance theory Improve frameworks Create a taxonomy for AI for awareness Propose a field experimental approach for institutional learning Conduct a high-level workshop/colloquium to follow-up on this study

Part I

Maps to Tell a New Story

Chapter 2

IC and Long-Term Wealth Creation at the National Level

In the past, tangible resources may have decided over 70% of a nation’s economic growth. Nowadays, intangible resources are becoming the larger contributor to not only national economic growth but also national well-being, which in turn captures non-financial factors such as health and happiness of a country’s citizens. Global tangible resources are limited and depleting day by day, whereas intangible resources, such as knowledge, instead accumulate over time. In February 2013, the newspaper the Economist ran a special report on the success of Sweden, Denmark, Norway and Finland – collectively known as “the Nordics”. These countries rank near the top across various benchmarking reports measuring the health of a society, from perspectives such as global competitiveness, ease of doing business, global innovation and prosperity. The Economist was curious to understand: “Why has this remote, thinly populated region, with its freezing winters and expanses of wilderness, proved so successful?” According to the same special report, the answer lay in a combination of honest and transparent Nordic governments, and among their citizens, the ability to trust in strangers and a strong belief in individual rights. “Trust means that high-quality people join the civil service. Citizens pay their taxes and play by the rules. As a result, government decisions are widely accepted.” (The Economist 2013). Furthermore, in addition to continuous structural reforms, the Nordic countries invest in human capital and protect people from the disruptions that are part of the capitalist system. In essence, the Economist’s special report revealed that the Nordics’ secret recipe for success lies mainly in intangibles, including honesty, transparency, trust, individual rights, structural reforms, and human capital. Given the increasing role that intangibles will continue to play among global economies, will the Nordics maintain its status as “leader of the pack”, or are there hidden complacencies that may drive performance downwards instead? To gain insights into the Nordics’ future competitiveness as seen through the lens of intangibles, we turn our attention in the coming sections to exploring measurements and models for national intellectual capital, with specific application to Sweden. © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 E. Ullberg et al., Intangible Asset Gap in Global Competitiveness, SpringerBriefs in Business, https://doi.org/10.1007/978-3-030-55666-2_2

13

14

2  IC and Long-Term Wealth Creation at the National Level

2.1  Models: How We Carve Out Our Contribution National wealth, national competitiveness, and economic development are issues of concern for national leaders, policy makers, and world organizations. As a result, there have been various kinds of national rankings made, such as the World Competitiveness Yearbook published by the International Institute for Management Development (IMD) and the Global Competitiveness Report by the World Economic Forum. The Organization for Economic Cooperation and Development (OECD) also provides estimates on the potential future wealth of its member countries, measured with indicators relating to agriculture, education, health, energy, environment, science and technology, which OECD proposed as being the new sources of growth in the coming century (OECD 2011). More recently, the first edition of the Global Knowledge Index (GKI 2017) was launched in November 2017, as a joint initiative between the United Nations Development Programme and Mohammed bin Rashid Al Maktoum Knowledge Foundation (UNDP and Mohammed bin Rashid Al Maktoum Knowledge Foundation 2017). The index aims to measure the multidimensional concept of knowledge and covers seven categories across 133 countries. Such ranking enables national leaders to locate the relative position of their own nation in the global arena, find a nation to benchmark against, and then strategize their policies for securing national development and competitiveness. In particular, the increasing recognition that intangibles are one of the most important sources of prosperity and progress has prompted studies in the area. IC models provide a useful conceptual means to generate insights around which intangible resources are weak and which aspects of the resource deployment system can be improved (Roos 2017). A comprehensive intangible intellectual capital model that tracks intangibles mainly at enterprise level, Skandia Navigator, was introduced (Edvinsson and Malone 1997). Following this, there have been a number of efforts to assess IC at national level as well1. For instance, declaring 1996 as the Year of Innovation, the Swedish government together with Stockholm University modified the Skandia Navigator at the national level to quantify Sweden’s critical success factors (Edvinsson 2002). Rembe (1999) examined the components of national attraction from the viewpoint of foreign investment in Sweden and proposed a strategic plan for the future development of Sweden’s human capital, market capital, process capital and renewal capital. In turn, The Danish Agency for Trade and Industry sponsored the development of comprehensive intellectual capital indicators based on several Nordic and Danish companies’ experiences; and the Norwegian government sponsored the development of a competence capital model including intellectual capital (Malhotra 2003). 1  A number of IC assessments have attempted to lift this analysis to national level, such as the work done by Lin and Edvinsson (2013) on Sweden, Denmark, the Nordics and Israel, as well as to regions such as the Arab nations and the Pacific Islands (Bontis 2004; Bounfour 2003; Schiuma et al. 2008; Ståhle and Bounfour 2008). Readers can refer to Lin and Edvinsson (2011) for details on relevant efforts in assessing national intangible assets.

2.1 Models: How We Carve Out Our Contribution

15

In the Netherlands, four accounting firms were invited to conduct a practice-­oriented study of the country’s intangible assets. Israel has sought to identify its hidden values and the key driving success factors along its 60 years of existence in different areas such as education, patents, the number of scientists engaged in research and development, international openness, the computer and its communication infrastructure (E. Pasher 1999; Edna Pasher and Shachar 2007). These examples show how various countries have developed their own means of measuring intellectual capital for the purpose of creating and sustaining national competitiveness (Lin and Edvinsson 2011). The merit of such measurement development is that each country is able to determine specific indicators relevant to national characteristics and needs. However, different national approaches to IC measurement do not lend themselves to a common framework for cross-country comparison. In addition, differing regional-national statistical systems as well as levels of data quality has resulted in inconsistencies in comparison and analysis (Klein 2000). Furthermore, most national intellectual capital measurement models analyse existing data at the input and output level (Bounfour 2003), without examining the process and renewal capability of nations. Studies that do cover process and renewal dimensions tend to be one-off – for a particular region such as the Arab countries (Bontis 2004) or a particular country such as Italy and Finland (Käpylä et al. 2012; Schiuma et al. 2008) – which does not contribute to continuity in tracking performance over time. To address the aforementioned constraints, Lin and Edvinsson (2008) developed a statistically validated 28-indicator model measuring national intellectual capital (NIC) based on data purchased from the Switzerland-based International Institute for Management Development (IMD), a reliable database of indicators collected over a period of almost 30 years since IMD published its first World Competitiveness Yearbook in 1989. The NIC model was later modified and expanded to cover 48 indicators. This revised model, called the ELSS (Edvinsson, Lin, Ståhle, Ståhle) NIC model (Ståhle et al. 2015), removed outdated indicators (such as literacy) and included indicators reflecting current concerns (such as gender equality and freedom of speech). The latest update to the NIC database, performed in 2019 with the most current data of 2018, spans yearly data for 59 countries for the period 2001 to 2018. Figures 2.1 and 2.2 show how the 48 indicators combine input/process/output and basic/enhancer/achievement perspectives to form a comprehensive coverage of national intangible assets (see Fig. 1 in the appendix for detailed indicator definitions). These assets include human capital, market capital, process capital, and renewal capital, and are described as follows: Human capital (HC) includes knowledge, wisdom, expertise, intuition, and the ability of individuals to realise national tasks and goals. It also includes the values encompassed within the culture and philosophy of a nation. Human capital constitutes a population’s total capabilities as reflected in education, knowledge, health, experience, motivation, intuition, entrepreneurship and expertise, and are captured through indicators such as a highly skilled labour force, the availability of scientists and engineers, female participation in the labour force, and health (life expectancy, physicians). Human capital provides the resources for the development and

16

2  IC and Long-Term Wealth Creation at the National Level

Fig. 2.1  NIC indicators – human and market capital. (Indicators marked with an asterisk (*) are based on expert ratings given on a scale of 1 to 10)

Fig. 2.2  NIC indicators – process and renewal capital. (Ibid)

c­ ultivation of other areas of intellectual assets such as R&D and training, with the human factor being the most important link in the process of value creation. Market capital (MC) refers to the general assets embodied in a nation’s relationship with the international market. It is the aggregate of a country’s capabilities and successes in providing an attractive, competitive solution to the needs of its international clients, a country’s investment and achievements in foreign relations, as well as its exports of quality products and services (Bontis 2004). The intangible assets here include customer or national loyalty, openness to globalisation, flexibility and adaptability, resilience of economy, as well as the satisfaction expressed by strategic customers and national trading partners.

2.2 Maps of Sweden, Nordics, Switzerland, Israel and Singapore

17

Process capital (PC) is the cooperation and flow of knowledge that require s­ tructural intellectual assets. These include: information systems, hardware, software, databases, laboratories, national infrastructure including transportation, information technology skills, communications and computerization, technological readiness and telecom services, personal computers, cellular subscribers, cyber security, quality scientific research institutions, knowledge transfer, a legal environment for entrepreneurship, a minimum number of days to start a business, a quality management system, and agricultural productivity. Such structural intellectual assets sustain and increase the output of human capital. Renewal capital (RC) refers to a nation’s capabilities in and investments towards increasing its competitive strength in future markets, which, in turn, encourages future growth. Renewal and development assets include investments in research and development, patents, trademarks, start-up companies, the number of scientific publications, the number of patents registered in the US, EPO patent applications, total expenditure on R&D, and capacity for innovation. It should be noted that the country ranking is done in a closed system with relative scores. That is, ranking is made for a fixed number of countries only (in this case, from a pool of 59 countries). Even if there is improvement in country A, if the improvement of countries B and C is much more than country A, it is likely that there would be a decrease in ranking for country A. In other words, it is a ranking based on relative performance from one country to another. Therefore, the NIC model reveals new rising stars which countries should watch out for in terms of their competitiveness in the global market.

2.2  M  aps of Sweden, Nordics, Switzerland, Israel and Singapore How does the NIC model work in practice? This section describes how the model explains the relationship of national intangible assets to current performance and future trajectories in terms of global competitiveness, starting with Sweden using the Nordics as peer countries for benchmarking then expanding the analysis to include Switzerland, Singapore and Israel. Figure 2.3 shows historic 18-year data for renewal capital for the four Nordic countries, as well as its trend towards 2020. The reader might recall that renewal capital captures a nation’s capabilities in and investments towards increasing its competitive strength in future markets. Among the four component capitals of NIC, renewal capital is most distinctive capital that differentiates Nordic countries from other countries. Given Sweden’s current performance in many global benchmarking reports, which line would the reader expect to represent Sweden vis-à-vis its Nordic peers? The reader may be surprised to realise that Sweden, while currently ranked top among the Nordic countries in terms of renewal capital, is nevertheless facing a

18

2  IC and Long-Term Wealth Creation at the National Level

Renewal Capital of Four Nordic countries and trend to 2020 8 7.5 7 6.5 6 5.5 5 4.5 4 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Fig. 2.3  Renewal capital of four Nordic countries and trend to 2020 Renewal Capital and trend to 2020 8 7.5 7 6.5 6 5.5 5 4.5 4 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Denmark

Finland

Norway

Sweden

Trend Denmark

Trend Finland

Trend Norway

Trend Sweden

Fig. 2.4  Renewal capital of four Nordic countries and trend to 2020 – with countries identified

downward trajectory (see Fig. 2.4, which is the same map as Fig. 2.3 but with the countries identified). Finland is in a similar position as Sweden. The renewal capital of Denmark and Norway, however, is on the rise. If Sweden and Finland do not make any interventions to address their downward trajectories, Denmark will take over Sweden as the number one Nordic country in renewal capital by 2020, and Norway will very likely surpass Finland in 2023. This map thus sends a warning signal to the currently high scoring countries Finland and Sweden. The following maps elaborate on potential remedial areas that could mitigate or even reverse these countries’ downward forecasted performance in renewal capital, by examining other components of NIC in further detail. Figure 2.5 illustrates the impact that NIC has on each countries’ gross domestic product (GDP). Here, Norway has a steady growth in the correlation it experiences

2.2 Maps of Sweden, Nordics, Switzerland, Israel and Singapore

19

GDP per capita in USD ? 140k 120k

Luxembourg

Singapore

100k Norway 2018

80k

Switzerland

Norway 2001

Sweden 2018

60k Denmark 2018

Finland 2018

40k 20k Denmark 2001

Finland 2001

Sweden 2001

22 Overall IC ?

24

26

28

30

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40 DATA DOUBTS

Fig. 2.5  National Intellectual Capital vs. GDP per capita (PPP) for four Nordic countries

between NIC (shown in the figure as “Overall IC”) and GDP (captured in the figure as “GDP per capita (PPP)”). In other words, the correlation between Norway’s NIC and its GDP is increasing. Although Norway still lags behind Denmark and Sweden in absolute NIC terms, it has a higher level of GDP per capita (PPP). This begs a few questions. If the main reason for Norway’s high level of GDP is its oil resources, what would happen to Norway’s economic performance if those oil resources are depleted overtime? Further, even though Sweden performs better than Norway in terms of NIC, its GDP is lower than that of Norway’s. Given the increasing importance of intangibles in national economies, it could be worth exploring why Sweden’s NIC correlation with GDP does not seem as high as Norway’s. The three small countries at the right upper corner of the map are Switzerland, Singapore and Luxembourg. They provide different points for bench learning for Sweden given their strong performance in different areas. Switzerland has a strong showing in both NIC and GDP, while Singapore and Luxembourg have GDPs that are higher than those of the Nordic countries. Figures 2.6, 2.7, and 2.8 provide further insight into the progress of each Nordic countries’ NIC in relation to GDP over time. Figure 2.6 juxtaposes Denmark’s NIC and GDP progress with that of Norway. These two countries are seeing an upward trend in terms of both NIC and GDP, similar to the upward trajectory they are experiencing with renewal capital as shown in Fig.  2.4. Given their historic and future performance trends, Denmark and Norway might possess a hidden recipe or implicit policy in NIC which other countries might wish to learn from. When focusing in on Finland (Fig. 2.7), even though the country has experienced some progress in terms of GDP, its NIC seems to have regressed slightly over the past 18 years. Given that Sweden has shared a similar NIC profile and progression

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2  IC and Long-Term Wealth Creation at the National Level

GDP per capita in USD ? 140k 120k Norway 2001

100k

2018 80k 2018

60k 40k 20k Denmark 2001

22 Overall IC ?

24

26

28

30

32

34

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40 DATA DOUBTS

Fig. 2.6  National Intellectual Capital vs. GDP per capita (PPP) for Denmark and Norway

GDP per capita in USD ? 140k 120k 100k 80k 2018

60k 40k 20k

Finland 2001

22 Overall IC ?

24

26

28

30

32

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40 DATA DOUBTS

Fig. 2.7  National Intellectual Capital vs. GDP per capita (PPP) for Finland

with Finland in the past, it could be interesting to understand what Finland has lost in its evolution of NIC that Sweden should try to avoid. Figure 2.8 shows that while Sweden’s NIC and GDP have a positively correlated relationship, they have both experienced slight progress over the past 18  years. While Sweden performs well in absolute NIC terms comparing to most of its peers, there is room for improvement in terms of GDP growth. As the reader might recall from Fig. 2.6, Denmark and Norway are on an upward trajectory for both aspects, which might lend some lessons to Sweden.

2.2 Maps of Sweden, Nordics, Switzerland, Israel and Singapore

21

GDP per capita in USD ?

140k 120k 100k 80k 2018

60k 40k 20k

Sweden 2001

22 Overall IC ?

24

26

28

30

32

34

36

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40 DATA DOUBTS

Fig. 2.8  National Intellectual Capital vs. GDP per capita (PPP) for Sweden

The following maps introduce the relationships between GDP and human ­capital, market capital, process capital, and renewal capital respectively. Figure 2.9 shows that among the four Nordic countries, human capital has limited impact on GDP, as reflected by a relatively flat linear progression. It is nevertheless worth noting that Norway has experienced tremendous progress in its human capital over the past 18 years, having lagged behind its Nordic peers in 2001 but landing first in 2018. Figure 2.10 shows Denmark and Norway’s market capital (the countries’ assets in relation to the international economy) has made good progress with corresponding improvements in GDP over the last 18  years. Although their market capital regressed during the global financial crisis in 2008 as one would expect, it picked up from 2014 and onwards. In contrast, Sweden’s market capital and GDP both continued to grow during the financial crisis (as reflected in Fig. 2.11), and yet its market capital started to regress and then picked up from 2016. The question thus arises as to the reasons behind this difference in performance between Sweden and its peers Denmark and Norway, and whether it points to potential hidden areas of concern for Sweden’s competitiveness in the longer term. Figure 2.12 shows Denmark and Norway’s process capital (the flows of knowledge in the form of structural intellectual assets that contribute to the sustained or increase in human capital output) in relation to GDP. Denmark experienced some regression in its process capital during the financial crisis, unlike Norway. However, Denmark’s process capital picked up after the crisis. Similarly, as Fig. 2.13 illustrates, while Sweden faced some regression in its process capital during the financial crisis, in general it has experienced a positive growth in both process capital and GDP over the past 18 years. Among the three countries, Norway performed best in terms of the progress made in its process capital.

22

2  IC and Long-Term Wealth Creation at the National Level

GDP per capita in USD ?

140k 120k 100k Norway 2018

80k

Norway 2001

Denmark 2018

60k 40k

Sweden 2018 Finland 2018

20k

Denmark 2001

5 Human Capital ?

5.5

6

6.5

7

Sweden 2001

7.5

8

Finland 2001

8.5

9 DATA DOUBTS

Fig. 2.9  Human capital vs. GDP per capita (PPP) for four Nordic countries

GDP per capita in USD ?

140k 120k Norway 2001

100k Norway 2018

80k

Denmark 2018 Finland 2018 Sweden 2018

60k 40k 20k

Denmark 2001

1 Renewal Capital ?

2

3

4

Finland 2001

5

6

Sweden 2001

7

8 DATA DOUBTS

Figure 2.14 exhibits the renewal capital of the four Nordic countries in relation to GDP. As noted earlier in Fig. 2.4, both Denmark and Norway have progressed well in the area over the past 18 years. Norway in particular has caught up to levels closer to the other Nordic countries since 2001, though as of 2018 it is still lags slightly behind. However, Finland has been regressing in terms of its renewal capital over the same period. These two examples in contrast hint to hidden insights behind Norway’s turnaround performance, and Finland’s own loss of renewal capital. When it comes to Sweden, Fig. 2.15 shows that its renewal capital has regressed slightly over the last 18  years, with a slight negative correlation with GDP.  This

2.2 Maps of Sweden, Nordics, Switzerland, Israel and Singapore

23

GDP per capita in USD ?

140k 120k 100k

Norway 2001

2018

80k 2018

60k 40k 20k

Denmark 2001

3 Market Capital ?

4

5

6

7

8 DATA DOUBTS

Fig. 2.10  Market capital vs. GDP per capita (PPP) for Denmark and Norway

GDP per capita in USD ?

140k 120k 100k 80k 2018

60k 40k 20k

Sweden 2001

3 Market Capital ?

4

5

6

7

8 DATA DOUBTS

Fig. 2.11  Market capital vs. GDP per capita (PPP) for Sweden

regression began as early as 2002, far earlier than the 2008 financial crisis, and Sweden has experienced the greatest decline in renewal capital among the four Nordic countries. What would explain this regression, and what are some corresponding early warning signals? The following maps will seek to unveil this further.

24

2  IC and Long-Term Wealth Creation at the National Level

GDP per capita in USD ?

140k 120k 100k

Norway

Norway 2001

2018

80k

Denmark 2018

60k 40k 20k Denmark 2001

3 Process Capital ?

4

5

6

7

8 DATA DOUBTS

Fig. 2.12  Process capital vs. GDP per capita (PPP) for Denmark and Norway

GDP per capita in USD ?

140k 120k 100k 80k

Sweden 2018

60k 40k 20k

Sweden 2001

3 Process Capital ?

4

5

6

7

8 DATA DOUBTS

Fig. 2.13  Process capital vs. GDP per capita (PPP) for Sweden

It may first be worthwhile to consider Sweden’s renewal capital performance in comparison with countries outside the Nordics. Figure 2.16 looks at Sweden versus three small countries – Israel, Singapore and Switzerland – from the perspective of renewal capital in relation to GDP. These three countries were chosen given their performance in NIC and GDP, with Israel being a strong performer in renewal capital, Singapore in GDP, and Switzerland in both overall NIC as well as GDP, and are interesting from Sweden’s perspective given similarities in population size. While

2.2 Maps of Sweden, Nordics, Switzerland, Israel and Singapore

25

GDP per capita in USD ?

140k 120k Norway 2001

100k Norway 2018

80k

Denmark 2018 Finland 2018 Sweden 2018

60k 40k 20k

Denmark 2001

1 Renewal Capital ?

2

3

4

Finland 2001

5

6

Sweden 2001

7

8 DATA DOUBTS

Fig. 2.14  Renewal capital vs. GDP per capita (PPP) for 4 Nordic countries

GDP per capita in USD ?

140k 120k 100k 80k 2018

60k 40k 20k

Sweden 2001

1 Renewal Capital ?

2

3

4

5

6

7

8 DATA DOUBTS

Fig. 2.15  Renewal capital vs. GDP per capita (PPP) for Sweden

Singapore has the highest GDP among the four countries under comparison, its renewal capital clearly lags behind. In contrast, Israel’s renewal capital has had good progress, but without a corresponding growth in GDP. Switzerland in turn is the top performer in terms of renewal capital while at the same time experiencing growth in GDP. The different experiences of these three countries may provide lessons from various perspectives for Sweden in terms of factors supporting renewal capital progression linked to GDP.

26

2  IC and Long-Term Wealth Creation at the National Level

GDP per capita in USD ?

140k 120k

Singapore 2018 Switzerland 2001

100k

Switzerland 2018

80k

Sweden 2018

60k 40k

Israel 2018

20k Singapore 2001 Israel 2001

1 Renewal Capital ?

2

3

4

5

6

Sweden 2001

7

8 DATA DOUBTS

Fig. 2.16  Renewal capital vs. GDP per capita (PPP) for Sweden, Singapore, Israel and Switzerland

Renewal Capital Comparison of 3 Small countries and Sweden 9 8 7 6 5 4 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Israel

Singapore

Sweden

Switzerland

Trend Israel

Trend Singapore

Trend Sweden

Trend Switzerland

Fig. 2.17  Renewal capital of Sweden, Singapore, Israel and Switzerland and trend to 2020

Figure 2.17 shows the four countries’ renewal capital from a time period perspective. Here, among the four countries, only Sweden has experienced a downward trend in renewal capital. Further, Sweden and Switzerland began from similar points in 2002, but by 2018 the gap between them has widened significantly and looks set to continue to do so. What has caused this gap between Sweden and Switzerland’s renewal capital performance, and how can Sweden take steps to mitigate this? Figure 2.18 then delves into Sweden’s renewal capital more deeply by visualising its individual components. 11 out of 12 indicators fall within the 6–10 scale.

27

2.2 Maps of Sweden, Nordics, Switzerland, Israel and Singapore 12 Renewal capital indicators of Sweden 12

10

8

6

4

2

0

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Business RD Cooperation

Basic research Articles

RD of GDP Patents(US+EPO)

R&D per capita Entrepreneur ship

IP right DA Technology

UP/RD expenditure Venture capital

Fig. 2.18  12 renewal capital indicators of Sweden

The indicator “utility patent/R&D expenditure” has the lowest score among the 12 indicators, but its performance has been improving over time. “Entrepreneurship2” has the second lowest score. Furthermore, four indicators have been on a downward trend – business R&D spending, R&D US$ per capita, R&D spending as a percentage of GDP, and scientific articles – with the last two indicators experiencing the greatest decline. It may be worth noting that while the percentage of R&D investment in Sweden may not have changed much in absolute terms, its relative position would be affected given the significant increase in R&D spending by other countries. Given Norway’s significant progression in renewal capital over the years, as evidenced by Figs. 2.4 and 2.14, its individual renewal capital indicators are mapped out in Fig. 2.19 to provide further insight. The top nine indicators have progressed from a 4–8 position in 2001 to a 6–9 one in 2018, showing a general upward trend. In particular, Norway has experienced significant improvement in terms of the development and application of technology, corporate and university cooperation, and scientific articles. An interesting point of note for Sweden is that while Norway’s investment in R&D has been similar to that of Sweden’s over the past 18  years, unlike Sweden it has experienced a corresponding increase in the number of scientific articles generated.

2  The indicator “entrepreneurship” is based on expert ratings and indicators whether the entrepreneurship of managers is widespread in business.

28

2  IC and Long-Term Wealth Creation at the National Level 12 Renewal capital indicators of Norway

10

8

6

4

2

0

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 R&D per capita IP right Business RD Basic research RD of GDP UP/RD expenditure DA Technology Cooperation Articles Patents(US+EPO) Entrepreneur ship Venture capital

Fig. 2.19  12 renewal capital indicators of Norway

We now turn our attention towards digitalisation potential in Sweden and the Nordics, which will become more and more important in an increasingly digitalised society. The following three maps – Figs. 2.20, 2.21 and 2.22 – aim to capture this. Figure 2.20, which specifically visualises the process capital indicator “computers per capita and mobile subscribers”, shows that in 2001, when computer and mobile penetration was low, Sweden and Norway nevertheless achieved high scores in the area, with Sweden performing better. Gradually, as other countries increased their investments to enable citizen access to these technologies, Sweden’s and Norway’s relative performance declined. It is worthwhile noting however that post-­ financial crisis, Norway’s indicator score picked up and returned to 2001 levels as of 2018, while Sweden failed to do so. In relation to the process capital indicator “Internet and broadband subscriptions”, Fig.  2.21 shows that while Sweden started out with a higher score than Norway in 2001, it was surpassed by Norway in 2016. Why has Norway experienced such a strong progression in these digitalisation-related process capital indicators as compared to Sweden? And why Norway has a regression from 2017? Data for “innovative capacity” became available since 2009, and while it is not included in the current version of the NIC model, it is still interesting to observe its development. It is derived from expert ratings on a nation’s capacity among its firms to generate new products, processes and/or services, which is in turn important in harnessing the potential that digitalisation brings. Figure 2.22 shows that Sweden has the best innovative capacity among the Nordic countries in 2016, experiencing good progress since 2009. The other three countries have also experienced an increase in innovative capacity from 2009 to 2018.

29

2.2 Maps of Sweden, Nordics, Switzerland, Israel and Singapore

GDP per capita in USD ?

140k 120k

Norway 2001

100k Norway 2018

80k 60k

Sweden 2018

40k 20k

Sweden 2001

1 Computer + Mobile ?

2

3

4

5

6

8

7

9

10 DATA DOUBTS

Fig. 2.20  Computer + mobile indicator comparison between Sweden and Norway

GDP per capita in USD ?

140k 120k

Norway 2001

100k Norway 2018

80k 60k

Sweden 2018

40k 20k

Sweden 2001

0 1 2 Internet + broadband ?

3

4

5

6

7

8

9

10 DATA DOUBTS

Fig. 2.21  Internet + broadband indicator comparison between Sweden and Norway

These three maps provide a glimpse into Sweden’s competitiveness when it comes to digitalisation – while it performed well in early years when digitalisation was yet mature, it has lost ground in recent years as other countries respond to the increasing importance in the area with corresponding investments. Sweden however still has an edge when it comes to innovative capacity, which it should leverage on and look to sustain.

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2  IC and Long-Term Wealth Creation at the National Level

GDP per capita in USD ?

140k 120k

Denmark 2009

100k Norway 2018

80k

Norway 2009

Denmark 2018

60k

Sweden 2018 Finland 2018

40k 20k

Sweden 2009

Finland 2009

3 Innovative ?

4

5

6

7

8 DATA DOUBTS

Fig. 2.22  Innovative capacity vs. GDP per capita (PPP) for four Nordic countries

As we have seen, in the early 2000s, the four Nordic countries generally fell within three groups in terms of NIC performance. Finland and Sweden were the high performers with similar NIC progress, with Denmark being in the middle, and Norway as the laggard. As observed however, their relative positions have shifted over the years and the picture looks quite different as of 2018. To understand what these shifts mean for Sweden specifically, five of its indicators with declining performance have been identified for deeper analysis, mapped according to Sweden’s performance against that of its peers. Some maps exclude Finland for visual clarity, as it shares a similar NIC progression as Sweden. Figure 2.23 shows that while Sweden and Denmark held similar positions in terms of current account balance3 in 2001, Sweden has nevertheless been surpassed by Denmark as of 2018. This is despite the fact that Sweden is larger than Denmark in terms of area and population, thus perhaps leading to the expectation that its economic health should outperform that of Denmark. Figure 2.24 shows that between Sweden, Denmark and Norway, Sweden had the best government efficiency4 as at 2001. It has however been surpassed by Denmark and Norway by 2018. Norway has the most outstanding progress in government efficiency over the past 18 years.

3  A country’s current account balance points to the health of its economy, and is defined as the sum of the balance of trade (good and service exports less imports), net overseas income, and net current transfers. 4  Government efficiency indicates whether the country’s government bureaucracy hinders business activity, and is based on expert ratings.

2.2 Maps of Sweden, Nordics, Switzerland, Israel and Singapore

31

GDP per capita in USD ?

140k 120k 100k 80k Denmark 2018

60k

Sweden 2018

40k 20k

Sweden 2001

Denmark 2001

2 0 1 Current account balance ?

4

3

5

6

7

8

9

10 DATA DOUBTS

Fig. 2.23  Current account balance vs. GDP per capita (PPP) for Sweden and Denmark

GDP per capita in USD ?

140k 120k Norway 2001

100k Norway 2018

80k Sweden 2018

60k

Denmark 2018

40k 20k

Sweden 2001

Denmark 2001

1 Government efficiency ?

2

3

4

5

6

7 DATA DOUBTS

Fig. 2.24  Government efficiency vs. GDP per capita (PPP) for Sweden, Norway and Denmark

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2  IC and Long-Term Wealth Creation at the National Level

Figure 2.25 shows that since 2001 Sweden has been lagging behind Finland in terms of utility patents/R&D expenditure5, 6. This means that, for every dollar spent on R&D, Sweden has been reaping fewer results as compared to Finland. Furthermore, Sweden’s performance in terms of its generation of scientific articles has been gradually decreasing, as Fig. 2.26 illustrates. In contrast, Denmark has been making tremendous improvements in the area, even surpassing Sweden as of 2018. Figure 2.27 shows that in terms of venture capital7, while Sweden still outranks Norway as of 2018, Norway has been closing the gap between itself and Sweden between 2001 and 2018, with Sweden declining in its relative performance and Norway making great strides forward. Furthermore, the relatively flat lines shown in the figure reflect a low correlation between venture capital investment and GDP for both countries. In other words, for certain years, more venture capital investment has not been accompanied with GDP growth.

2.3  C  ountry Comparison of Sweden and Small High-Tech Countries 2.3.1  Initial Comments Having been devoted to NIC studies since 2004, one of this pre-study’s authors, Professor Carol Lin, has been able to build a NIC database spanning from 2001 to 2018 for 59 countries. This set of longitudinal data has enabled her to observe the development of IA by nation and by region. Given her close connection with some Nordic scholars, she has having been paying special attention to the NIC of the Nordic region. Her early work on Nordic NIC, done in collaboration with another co-author, Professor Leif Edvinsson, was in turn published in the Journal of Intellectual Capital in 2008 and obtained the “Highly Commended Award Winner at the Literati Network Awards for Excellence 2009”. While updating the dataset and producing NIC country rankings yearly, Professor Lin noticed that the ranking of Sweden and Finland was gradually declining. Although Sweden is still in the top five, its most recent 2018 NIC ranking is one rank below its 201–2015 years average. In particular, among the 59 countries that form the dataset, Sweden used to rank either first or second in renewal capital.

5  Utility patents protect the structural and functional aspects of a new or improved product or system. This indicator captures the utility patent performance of every R&D dollar spent. 6  Denmark and Norway are not shown in this map as they have not performed as well in this area, and thus may not have as much learning points for Sweden. 7  The indicator “venture capital” is based on expert ratings on whether venture capital is readily available for businesses.

2.3 Country Comparison of Sweden and Small High-Tech Countries

33

GDP per capita in USD ?

140k 120k 100k 80k Sweden 2018

60k

Finland 2018

40k 20k

Finland 2001

Sweden 2001

1 2 UP at RD expenditure ?

3

4

5

6

7

8

9

10 DATA DOUBTS

Fig. 2.25  Utility patents/R&D expenditure vs. GDP per capita (PPP) for Sweden and Finland

GDP per capita in USD ?

140k 120k 100k 80k Sweden 2018

60k

Denmark 2018

40k 20k

Sweden 2001

Denmark 2001

Articles ?

1

2

3

4

5

6

7

8

Fig. 2.26  Scientific articles vs. GDP per capita (PPP) for Sweden and Denmark

9

10 DATA DOUBTS

34

2  IC and Long-Term Wealth Creation at the National Level

GDP per capita in USD ?

140k

120k

Norway 2001

100k Norway 2018

80k Sweden 2018

60k

40k

20k

Sweden 2001

2 Venture capital ?

3

4

5

6

7

8 DATA DOUBTS

Fig. 2.27  Venture capital vs. GDP per capita (PPP) for Sweden and Norway

However, in 2018, Sweden’s renewal capital ranking declined to third place. Despite its still relatively strong performance vis-à-vis other countries, such developments send an early warning signal. Winners often possess both vision and foresight, as well as the ability to act out on their vision. The life-cycle theory teaches us that one should “beware of plateaus”. The top performer, while at the peak, should already begin to start worrying about possible decline. The maps of this study thus show potential areas of concern that relevant parties should contemplate on in order to prevent the “peak-then-­ decline” syndrome.

2.3.2  Country Comparison Discussion When a country has achieved its economic plateau and its growth starts to slow down, the government has to ask, “What’s next?” This pre-study has highlighted some potential warning signs towards complacency and compromised future competitiveness in Sweden. However, all is not lost. The following section lays out a series of considerations that policy makers can use as a basis for decision making when it comes to prioritised strategic intervention and investments. The government should first prioritise the following areas for Sweden: economic growth, quality of life, public health, technology advancement, and happiness of people.

2.3 Country Comparison of Sweden and Small High-Tech Countries

35

If economic growth is Sweden’s top priority, then Singapore, with its high m ­ arket capital, would be a suitable country to benchmark itself against. Here, the Swedish government could consider pushing for more exports. Its performance relating to its current account balance (Fig. 2.23) indicates Sweden needs to pay more attention to its export/import balance, trade policies, exchange rate, competitiveness, foreign exchange reserves, and inflation rate. If quality of life is prioritised first, followed by economic growth, then Sweden can look towards Switzerland as an example. Switzerland has been a consistent high performer with continuous progress in both NIC and GDP growth. Lessons can be gleaned from Switzerland’s ability to retain its competitiveness despite facing increasing global competition. If public health and the happiness of its people have higher priority than economic growth, then Sweden should focus on improving government efficiency and pay more attention to the various elements of infrastructure represented within process capital. If technological advancement is first priority, then there should be serious investigation into the country’s decline in renewal capital, while peer countries like Denmark and Norway are advancing in the same area. In particular, policy makers should look into the reasons underpinning Norway’s tremendous progress, as well as the factors driving the downward trends in business R&D and venture capital in Sweden. Further, Sweden should delve into the five areas of decline as identified in Sect. 2.3 Reflections and implications for Sweden. As indicated by Figs.  2.1 and 2.2, government efficiency and venture capital are process-oriented and enhancers, whereas current account balance, utility patents, and scientific articles are outcomes and achievement-based. In the first instance, the process-oriented indicators “government efficiency” and “venture capital” are based on subjective expert ratings, that is, experts view Sweden as having decreased competitiveness and performance in these areas when compared with other countries. In the second instance, the three outcome-based indicators are based on actual values which can be measured; thus, a decline in indicator levels relates to a decrease in performance across these three indicators relative to other nations in the given pool of 59 countries. In other words, despite similar levels of R&D investment compared to its peers over the years, Sweden seems to be facing a comparatively decreasing return on its investments given the declining generation of scientific articles and utility patents. Despite the current limitations of the NIC model, the observations garnered from an analysis of Sweden’s NIC standing versus its peers should provide a helpful starting point for decision-making with a view on the contribution of a nation’s IC towards current and future competitiveness across multiple fronts. While this report has mainly focused on comparing Sweden with other Nordic countries and similarly sized and high-tech countries, it could be useful to conduct comparisons between Sweden and high performing countries based on the Global Innovation Index, high growth countries, emerging countries, and the “King-Kongs” of high-tech (USA, Germany and China as well as Japan and South-Korea).

36

2  IC and Long-Term Wealth Creation at the National Level

2.4  Limitations of the Current NIC Model The NIC model has certain constraints. For one, it is confined to the data available in the IMD database, which in itself has its limitations. For example, “the percentage of elementary school students who can code” could be a good future-oriented indicator of human capital; however, there is currently no such data available. In addition, existing statistics-driven data tends to report on historical performance, such as R&D spending as a proportion of GDP. Any existing future-oriented indicators, such as innovative capacity and entrepreneurship, are based on qualitative ratings, which are inevitably subjective in nature. Furthermore, analysing the results of the model is based only on the model’s cross-country comparison data and does not reflect individual country characteristics. Building country-specific features into the calculation formula runs the risk of excluding equally important yet perhaps not as prominent features from the ­perspective of each country. For instance, Norway’s vast oil resources are not directly reflected among the indicators, and such information would be better served as supplementary material to aid in interpreting the results. In addition, analysis of the findings, implications and applications arising from the NIC model should be performed with a deep understanding of the specific nation’s context, background, and even hidden societal agendas that would have been otherwise unnoticed by the general observer.

Chapter 3

IC & IA Mapping at the Global Enterprise Level

Current and upcoming developments are raising the importance of IC. As observed in the previous section, advanced nations like Sweden depend on intangibles for more than 70% of value created. At an enterprise level, more than 80% of organisational value are represented by intangibles today, a complete reversal of the situation just forty years ago when this same value was driven instead by tangible assets. Clearly, IC is increasingly becoming a key enabler for future prosperity. This may thus explain why the mapping of intellectual capital (IC) and intangible assets at enterprise level has become a growing area of interest over the past 25 years. More than a decade ago, the Ministry of Economy, Trade and Industry (METI) in Japan initiated a program on intellectual assets. Since then METI, in efforts led by Director Taka Sumita, who is also a board member of the New Club of Paris, has held an “Intellectual Assets” week every November, in collaboration with Japanese enterprises, Waseda University and the Nikkei Stock Exchange. In Germany, the Federal Ministry of Economics and Labour (German: Bundesministerium für Wirtschaft und Arbeit) initiated a major project in 2004 for mapping the IC and intangible assets of enterprises. This involved reporting on intangible assets (German: Wissenskapital) via an intellectual capital statement (German: Wissensbilanz) and was to be included as a supplement to the traditional balance sheet. Germany’s pioneering work in the area was later on picked up by the European Commission for dissemination to the rest of Europe. A number of initiatives and research during the last 21  years is described by Edvinsson (2013).

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 E. Ullberg et al., Intangible Asset Gap in Global Competitiveness, SpringerBriefs in Business, https://doi.org/10.1007/978-3-030-55666-2_3

37

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3  IC & IA Mapping at the Global Enterprise Level

3.1  Models List There are a growing number of mapping methods in progress, as well as ­applications in usage from thousands of enterprise cases globally. For the purposes of this report, three major approaches are highlighted which capture different perspectives on IC and intangible assets See Table 3.1.

3.1.1  IC Rating The IC Rating™ method (Jacobsen et al. 2005) has Swedish origins, having been developed in the late 1990s by Intellectual Capital Sweden AB. While the methodology was later on sold to Tokyo-based management consulting company ICMG group for dissemination in Japan, China and other parts of Asia, it also spread to the US and led to the development of an IC Rating-based methodology by Smarter Companies, which works with companies to create integrated management systems. This method aims to measure a company’s IC in addition to traditional balance sheet assets, to enable the company to use its intangible assets more effectively for value creation and increased competitiveness, which becomes particularly pertinent in today’s knowledge-based economy. The IC Rating™ model comprises of three main IC areas: organisational (or internal) structural capital, which captures knowledge transfer methodologies, processes and systems, and even organisational culture; human capital, with key value drivers such as employee knowledge, skills, abilities, innovativeness and experience; and relational capital (or external structural capital), which comprise of a company’s external relations with its stakeholders (see Fig. 3.1). These three areas express themselves as the operational effectiveness of an organisation. The IC Rating ™ model takes it one step further in providing the strategic context for a company’s activities by considering the company’s business recipe. As Jacobsen et al. (2005) notes, doing things right does not necessarily equate to doing the right things. A weak business recipe would render a company’s operational effectiveness irrelevant; a strong one provides a good foundation for the realisation of the company’s IC potential. The model further views intangible assets from three forward-looking ­perspectives, to avoid the common pitfall that traditional accounting and financial Table 3.1  List of models Approach IC Rating  a systematised rating of IC effectiveness, IC renewal and IC risk Wissenskapital and Wissensbilanz  Based on systems dynamics 4 Leaf Model of IC interactivity  Developed by Areopa

Purpose Reference Positioning IC Sect. 3.1.1 Navigating IC

Sect. 3.1.2

Managing IC

Sect. 3.1.3

3.1 Models List

39

Fig. 3.1  IC Rating™

management and measurement models face in attempting to predict the future through the lens of history. Instead, these three perspectives – IC effectiveness, IC risk, and IC renewal – examine the current effectiveness of the organisation in its use of intangible assets, while considering the risks challenging its effectiveness (for instance the loss of key employees), and its efforts and capabilities to renew and develop itself through, for instance, innovation and employee training. While the benefits of using models such as the IC Rating™ model may vary depending on organisational size and sector, there are some common motivations for doing so (Jacobsen et al. 2005). These include a better understanding of a company’s non-financial assets and the role they play in the company’s value creation; providing the organisation’s members with a shared language and terminology for IC; better internal management of IC and intangible assets; more transparency within the organisation on how intangible assets are used; and for external reporting purposes in signalling the true value and future performance of the company. Figure 3.2 provides an example of how the IC Rating™ model has been applied in practice by ICMG1. Smarter Companies has built on the logic of the IC Rating™ model in its own value creation framework, which also includes what it terms as “natural capital” in relation to sustainability management2 (see Figs. 3.3 and 3.4).

 Source: Satoshi Funahashi at ICMG Co. Ltd., Tokyo, www.icmg.co.jp, that initially was licensee to Intellectual Capital Sweden AB 2  Source: Mary Adams, Founder of Smarter-Companies, Boston, USA and earlier licensee to Intellectual Capital Sweden AB 1

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3  IC & IA Mapping at the Global Enterprise Level

Fig. 3.2  An example of IC Rating™ as applied to an organisation by ICMG

Fig. 3.3  Smarter Companies’ value creation worksheet

3.1 Models List

41

XPX Global Value Creation Canvas XPX Global At Jan, 2017

PARTNERS fl‡ Relationship Capital CUSTOMRES XPX Chapters

Resource Inventory

SUPPLIERS Wild Apricot (platform) Supporting Strategies (fin) WebBright (web development) Stripe (paymts) DigiCert (security)

STAKEHOLDERS XPX Members XPX Sponsors Business Owners Private Company Community

PURPOSE Strategic Capital

PROPERTY Structural Capital

fl‡ PEOPLE Human Capital

fl‡ PLANET Natural Capital

VALUE PROPOSITION Give Chapters the benefit of a shared brand, network and services while maximizing local control BUSINESS MODEL Service License fee based on gross revenues No fees are payable until a new Chapter has sufficient cash

PROCESSES Chapter start-up Event mgmt Membership mgmt Web site service and development

COMPETENCIES Association mgmt Community development Social media

RESOURCES XPX Global is virtual so not significant user of natural resources.

DAT A/IP Owners’ Academy on-line content and videos Member profiles Email list LinkedIn and Twitter accounts Website Manuals URL’s Brands BUILDINGS/EQPMT

ADMINISTRATORS Donna Powell Angie Ellis

LAND

CULTURE Professional Collaborative Learning Adaptive

N/A

N/A

MANAGEMENT Mary Adams FOUNDERS Dan Guglielmo Shannon Zollo Mike Oleksak ADVISORS/BOARD XPX Leadership Collaborative (incl representatives from all Chapters)

WASTE Chapters hold inperson meetings which imply travel and some paper use.

Canvas used under Creative Commons Attribution Share-Alike License - Please contribute to the open tools at www.smarter-companies.com

Fig. 3.4  Smarter Companies’ value creation framework

3.1.2  Wissensbilanz and Wissenskapital In 2004, the German Federal Ministry of Economics and Labour conducted a project to look into the intangibles for small-medium enterprises (SMEs) (Federal Ministry of Economics and Labour 2004). These intangibles were called Wissenskapital, and an account of the inventory and evaluation of these intangibles should supplement the traditional balance sheet in the form of a Wissensbilanz, that is, an intellectual capital statement. This project, involving organisations ranging from SMEs to associations to banks, was considered a success, with the implementation of an intellectual capital statement perceived by the organisations involved as a positive contribution to their competitiveness and development. Special guidelines were developed as part of this programme, providing explanations to important principles and proven methods, as well as tips and practical guidance to developing an intellectual statement. These guidelines reduced the efforts needed by SMEs to implement such an intellectual statement. To enable organisations to understand its various IC components, the project group proposed the model described in Fig. 3.5. The project group hopes that the model will serve to support decision-making by clarifying aspects contributing to the organisation’s success, and as a tool for inventorying the use of IC in the organisation.

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3  IC & IA Mapping at the Global Enterprise Level

Fig. 3.5  The intellectual capital statement model developed by the project group

A core feature of this model is the identification of intangibles – human, structural and relational capital – as influencing factors affecting the efficiency and effectiveness of organisational performance and its success on the market. This is essentially based on the systems dynamics approach developed by Professor Jay Forrester at the Boston-based Massachusetts Institute of Technology (MIT) (see Figs. 3.6 and 3.7). This approach highlights the interdependences of the various IC components, as opposed to a positional approach, to make IC impact beyond traditional accounting. This also means that here, IC and intangibles may be regarded as a flow rather than as an object. Figure 3.8 illustrates how the German project captures the individual influencing factors of IC and their interactions via a matrix, and Fig. 3.9 provides an example of a simplified interdependency network for a central factor to the organisation in question (in this case, the development of product innovations). The German’s project’s success also attracted Japan’s METI to pursue a similar project. This initiative by METI was performed by Taka Sumita, in collaboration with Professor Yasi Hanado at Waseda University, for adaptation to the context of Japan. This inspired a deepening work in the World Intellectual Capital Initiative with a group of major accounting firms globally. (“CADIC” n.d.) The project was then picked up by the European Commission for further dissemination to other countries in Europe, via the programme RICARDIS – Reporting Intellectual Capital to Augment Research, Development and Innovation in SMEs (European Commission  - DG Research 2006), CADIC  – Cross-Organisational Assessment and Development of Intellectual Capital (‘CADIC’, n.d.), and InCaS – Intellectual Capital Statement (ICS) for Europe (European Commission  - DG Research 2011) (see Figs. 3.10, 3.11, 3.12, and 3.13).

3.1 Models List

43

Fig. 3.6  Systems Dynamics approach to IC mapping (1)

Fig. 3.7  Systems dynamics approach to IC mapping (2)

In particular, the Europe ICS programme recommends adopting a portfolio management approach to intangibles, based on their relative performance to strategic objectives and their potential for improvement (see Fig. 3.13).

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3  IC & IA Mapping at the Global Enterprise Level

Fig. 3.8  An excerpt from a matrix analysing the interactions of intellectual capital

Fig. 3.9  An example of an interdependency network

3.1.3  Areopa’s 4 Leaf Model The 4 Leaf Model was developed in Areopa by Ludo Pyis and his team from as early as the 1990s to capture the interplay between human capital (HC), structural capital (SC), relational capital (RC) and strategic alliances or network capital (SA), identifying 15 overlapping areas (see Fig. 3.14). The model is meant to help company management develop strategies to understand and manage its various IC components. By applying the 4 leaf approach with detailed description of about 77 various interactivity aspects, the companies now can determine the future potential of a

3.1 Models List

45

Fig. 3.10  An European Intellectual Capital Statement (ICS) Guideline co-developed by the European Commission and InCaS

Figure 2: ICS Procedural Model

Step 0 PreArrangement Procedure: Analysis of the initial situation Analysis of the enterprise's “fitness level” Establishment of project management

Step 1

Step 2

Step 3

Management Meeting

Workshop 1

Internal work

Business Model

Procedure: Definition of the System Boundaries Definition of the value creating model (created value, main business processes) Definition of the business strategy (external business environment, main strategic objectives, business success)

IC Analysis

Procedure: Definition of IC factors (human, structural and relational capital) Assessment of quality, quantity and systematic of IC factors impact analysis (Impact Scoring/ Cross Impact Matrix)

Measurement

Procedure: Collection of indicators to validate the IC assessment. Assignment of 2-6 indicators per IC factor.

Step 4

Step 5

Workshop 2

Internal work

Strategy Refinement & Measures

Final ICS document

Procedure: Interpretation of results from IC analysis (strengthsand-weaknesses analysis,impact analysis, identification of fields of intervention) Deriving IC strategy and measures)

Procedure: Finalisation of ICS document on the basis of the decision of IC document requirements (internal/external version)

Fig. 3.11  A suggested approach for developing an intellectual capital statement

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3  IC & IA Mapping at the Global Enterprise Level

Fig. 3.12  The use of a matrix to visualize the cross-influence and impact of IC factors

specific organisation’s IC. These value, taken on an aggregate basis and combined with the cost of creation, provides a monetary value for an organisation’s overall intangibles, and can be reported as a supplementary accounting statement. The 4 Leaf Model provides a means of documenting all of an organisation’s assets, which enables companies to grow, transform and drive shareholder value. Now companies and investors can benefit from a superior risk-return in investment due diligence simply by measuring and exploiting IC assets. However, an IC valuation system without a corresponding IC accounting system is insufficient. Auditors need to assess IC balance sheets, as well as have access to an IC auditing methodology that is approved by international accounting standards (IAS) and international financial reporting standards (IFRS). To address this, Areopa has developed an IFRS/IAS38 certified IC accounting and applied knowledge management implementation system, based on more than 40,000 man days of R&D and active participation in several high-level European Commission expert groups (European Commission - DG for Research and Innovation 2014), thus closing the loop on IC calculation, accounting and auditing.

3.2 Mapping though Case Application

47

Fig. 3.13  A portfolio management approach to IC

3.2  Mapping though Case Application One approach for a deeper understanding of IA and IC in relation to enterprises is to apply simplistic metrics. In the taxonomy and cascading model shown in Fig. 3.15, a preliminary calculation has been applied for the internet-based company

48

3  IC & IA Mapping at the Global Enterprise Level STRUCTURAL CAPITAL is the value of whatever remains in a firm after the human, customer, and strategic aliance capital have left the firm. It depends on how well the firm has managed to capture the knowledge.

SC

HUMAN CAPITAL is the total value of knowledge, skills, netwoks, and experiences held and deployed by the individual employees in a firm.

SC-HC

HC

SC SC-HC

Highly Structured

SC-HC-SA SC-HC-SA-CC SC-HC-CC

STRATEGIC ALLIANCE CAPITAL is the added value of the strategic alliance to the firm and the firm’s customers.

HCSA

SCHC-SA

SA

SC-HCSA-CC HC-SACC

SCSA

SC-SA-CC

SCCC

SC-SA

HCCC

SCHC-CC

CUSTOMER CAPITAL is the value of the firm’s customer relationship.

SC-SA-CC SC-CC HC HC-SA

CC

HC-SA-CC HC-CC

SA-CC

SA SA-CC CC

Low Structured

Fig. 3.14  Areopa’s 4 Leaf Model

IC TAXONOMY

The Hidden Values

UNIC IC Value Scheme TM Intellectual Property

Intellectual Assets

Innovation Capital

new? Process Capital

Organisational Capital

93%

Structural Capital

97% or 145 billion sek 150 billion sek

new?

Relational Capital

140 million users, x%

Human Capital

Intellectual Capital

2200 empl or 3 billion, 3%

Financial Capital

5 billion or 3%

Market Value

Fig. 3.15  IC as applied to Spotify using simplistic metrics as reported in 2017: 150b SEK (16b USD). Market value on NYSE in 2020 reported towards 50 billion USD

Spotify. Spotify seeks listing at NYSE, not NASDAQ since problems with Facebook IPO. The risks appear too high a NASDAQ even though a “dual listing” was offered for NY and Stockholm (Dagens Industri 2017-11-20). It highlights that, of the total market capital appreciation value assigned to the company, often only a minor part is included in the balance sheet as adjusted equity; the major value resides instead in the company’s IC and IA, and of that, only a fraction is visible. Part of this enterprise IC includes human capital, but a more critical portion comes from structural capital, or more specifically relational capital, the latter in particular linked to

3.4 Limitations of Current Models and Gaps for Further Action

49

e­ xisting as well as prospective customers, users and partners. In essence, this highlights that, while the most dynamic value comes from human capital, the most important and sustainable value comes from structural capital, with the latter often at work 24 hours a day!

3.3  The Impetus of IC Mapping for Enterprises A growing frustration with traditional accounting approaches and their growing irrelevance in communicating new value dimensions of the emerging economy has resulted in extensive global research as well as the prototyping of new approaches, some of which has been described in this pre-study. One of the early books on the subjects was even given the title Relevance Lost – The Rise and Fall of Management Accounting (Johnson and Kaplan 1991). A major barrier to progress in this area might be a lack of relevant enterprise data on a micro level, which has in turn resulted in distorted maps of the economy of nations at a macro level. Therefore, prototyping work is needed to generate deeper insights as well as refined methods, many of which are reported in the Journal of Intellectual Capital. Furthermore, raising public awareness and understanding of the role and impact of intangibles might result in the emergences of various quests to discovering the core of value creation in the economy and society of today and of the future. Some of these efforts include Softnomics, the circular economy, the knowledge economy, Wissensbilanz, and the neighbourhood economy.

3.4  L  imitations of Current Models and Gaps for Further Action Despite extensive research and efforts in the field of IA and IC for enterprises, there continue to be gaps linked to a lack of real awareness, understanding and integration of these concepts across all levels of the economy and society. These gaps exist in public perception, in statistics, in accounting, in management, in labour market regulations, in pricing models, in educational and vocational training programs, in media understanding and reporting as well as in political entrepreneurship. The current model of management accounting and its relevance was reviewed by Professors Johnson & Kaplan from as early as the late 1980s, as documented in the aforementioned book Relevance Lost (Johnson and Kaplan 1991). However, they also recognised emerging research in the area, with one of them penning a sequel called Relevance Regained (Johnson 1992). At the same time, Professor Baruch Lev began looking into the importance and value of innovation and R&D, with his contributions captured in Unseen Wealth, a report published by the Washington-based think tank Brookings Institution (Blair and Wallman 2000). The World Intellectual Capital initiative (www.wici-global.com) provides a comprehensive view of IC corporate reporting, and combining this with Integrated

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3  IC & IA Mapping at the Global Enterprise Level

Reporting initiatives (IIR) address some of the accounting gap. Much more is however needed to reveal the hidden wealth of societies and improve learning as well as policy dialogue. Just consider Greece and the debate around its debts, where the discussions have thus far excluded intangible historical value dimensions. The same might be relevant for many nations, which is why the work on NIC is important to present more solid navigational maps for future generations. A recent study by European Centre for Policy Reform and Entrepreneurship is revealing – for instance, it observes that high-income countries with good macroeconomic policies that also invest heavily in intangible capital tend to do well in the knowledge economy (or as the report calls it, “brain business”) and are likely to continue to do so (Sanandaji and Fölster 2017). To help Sweden and other similar countries regain lost ground as a leading society in the new IA economy, a number of initiatives and research are required. Some suggestions are laid out below, with a more extensive list available in Chap. 6. At a micro level, improved research and prototyping practices are needed to capture and describe, from an IC and IA perspective, the value as well as opportunity costs that technological developments such as the Internet of Things and artificial intelligence bring. These prototyping and research efforts might further take the form of action research of IA value creation, to inspire more prototyping and reveal new value patterns. Such prototyping has been done in Germany, Japan and Brazil and some EU countries. This can be further deepened through, for example, the offering of IA cheques to SMEs to spur awareness and understanding of enterprise IA and IC for productivity gains and value creation. To further quicken awareness of intangibles across all levels of society, an essential starting point is training journalists on how to view societal and economic developments through the lens of IC and IA. The same can be said of political leadership, to enable decision makers to shape a supportive societal infrastructure for IA and IC on all levels.

Part II

Policy Discussion in a New IA Era

Chapter 4

Policy Implications

The policy implications give an overview of areas of interest. They have the same focus as the analysis: starting with Sweden, then Nordics and finally Switzerland, Israel and Singapore, but are likely relevant for small high-tech countries in general beyond these in the pilot-study. The lessons from above presentation of IA, IC and NIC mapping at the enterprise level indicate that current national and business policy in Sweden needs to change in order to further develop intangible assets for economic growth, in order for the country to at least be on par with other Nordic and small country nations. Given that policies appear not to have changed overall during the last decade, the problem is likely that Sweden has rested on its laurels and possibly developed a level of complacency. New or reformed/renewed/repaired policies appear to be needed in order for resources to be appropriately redirected toward investments in IA, thereby enabling Sweden to catch up with “competing” nations and strengthen its relative position in the light of global competition. The impression by the authors is that only very basic levels of awareness regarding IA exists. This calls for awareness building on even the most fundamental IA understanding. Since the “responsibility” of IA is spread out among agencies and also vary among companies, as first step would be to work toward a coordinated, national approach. Such an approach begins with a better coordinating and dialogue between government and industry. Then initiatives taken by governments and industry alike are needed. Policies can then likely only be done by experimenting with different incentives that may encourage investments growth in IA, which in turn would aid competitiveness in a global market. A program proposal is presented in the last section, Chap. 6, see Table 6.1. Today’s global policy discussions tend to revolve around three themes  – economic, social and environmental concerns – all aiming towards sustained and inclusive development while meeting the needs of humanity. In popular terms, this can be said to reflect “profit, people and planet”. Profits are needed to create sufficient returns to cover risk and new investments; effects should benefit all people; better © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 E. Ullberg et al., Intangible Asset Gap in Global Competitiveness, SpringerBriefs in Business, https://doi.org/10.1007/978-3-030-55666-2_4

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stewardship of limited resources on the planet is required, for instance increasing productivity through the better “re-use”, not only use, allocation of natural resources. Re-allocation of natural resources demands knew knowledge, processes, technology, etc. and must be integrated in any policy today. However, such integrated policies appear not to exist yet. A state-driven approach is clearly not enough, a better dialogue is needed between government and industry. We therefore need to find way, by experimenting, to integrate a more efficient use of resources, which demands new investments in human capital and IA. In the past millennium, economic policy has focused on wealth creation. In turn, social policy, since the 1500s, ushered in to large extent the Reformation in Europe and subsequent renaissance for the betterment of the broader public, aimed towards providing education opportunities for all. The Reformation notably brought public education to women and children1. Today, 9 out of 10 children receive basic education. The UN Economic and Social Council, established in the UN charter in 1945 and representing approximately 70% of the UN’s work, can be seen as a reflection of nations’ desires to integrate the two policies in a coherent way. Environmental policy – realising the limitations of the planet from an economic and social perspective at the level of international policy – has arisen as a concern only within the past half century (the environmental movement got a flying start by the “Earthrise” photo2 of Apollo 8’s trip around the moon during Christmas in 1968 while the crew was reading from Genesis 13). However, the successful integration of these three policy areas is still an open question and intensely debated by in particular the world’s largest pollutants and economies such as China, India, the USA and parts of Europe. IA has always played a key role in all three areas, but it is only in the last few decades that IA has taken on a dominant role in wealth creation and in global cooperative efforts; more knowledge is needed to address common problems, and new innovations and technologies are needed to use limited environmental resources more effectively. This is a collaborative effort and therefore specialisation is required

1  Incidentally this fact was noted by both the Archbishop of the Swedish Church (former state church) Anjte Jackelén and the Prime Minster of Sweden, Stefan Löfven, during the 500th anniversary of the Reformation on 31 October 2017. 2  “It’s the picture that was credited with starting the environmental movement,” wrote author Jeffrey Kluger, referencing the Earthrise photo in a 2013 article for Time magazine. 3  Interestingly, Genesis Chap. 1 also speaks about man’s responsibility of being a good “steward” of the Earth, so the men and women of old had some sense of this concept at least since the beginning of civilization. Prior to civilization, infanticide was commonplace the norm to reduce demand of limited natural supply of food (North 1982). All this changed drastically with the first (agricultural) and second (industrial) economic revolution as private property rights on land changed incentives (North, idem) and, one could argue, technology (Ullberg 2015) (first patent system established in 1474 in Venice), increasing returns on and investments in food, energy and other technology, challenging Malthus pessimistic outlook of human betterment. Also, quoting Elon Musk as he literally reaches for the stars, well Mars, to be precise: “Humanity would essentially be a ‘steward of life’ as we know is” follows the same line of thinking as men and women of old (Frankel 2015).

4  Policy Implications

55

which puts a challenge to Sweden’s and other small countries’ focus in all these areas, increasingly in concert with not just Europe, but the world. To exemplify the long-term value of IA, one can look to the forests of southern Poland as a case in point4. For centuries, these forests were maintained impeccably, and cutting down a tree carried a death penalty. Why were these forests taken care of with such zeal? One key reason appears to have been the realisation by local leaders that the forests acted as a “sponge” for heavy rain in the mountains and served to slow down flash floods from the Wisła river, thus sparing the agricultural land, the main economic activity, and heavily populated plains that lay downstream. However, when Communism came along, the new leaders saw the forests as an underutilised resource and cut down the trees, supposedly for the (short-term) value of timber, creating a flash flood time-bomb in the making. In 1970 the flash flood came to pass, and without the forest “sponge” to slow down the rain, disaster hit. The Polish example reveals a triple-pronged policy in action where economic (agricultural land), social (education of foresters and people in law) and environmental (forest) policies were established in law by the monarchy of old and unfortunately subsequent lost by a change to a materialist government. There are many such cases in history, albeit localised. Globalisation has brought this to the fore with cross-border impacts, thus requiring the need for global policy coordination today. These examples indicate that perhaps it is more a “repair” or “reformulation” of what we have already learnt in the past that is needed, as opposed to any brand-new policy. The increasing level of IA appears to need some direction towards these classical problems. The successful development and implementation of policy on all three fronts will therefore require an increased understanding of and reliance on IA and how the national policy works together with the corporate policy. This pre-study thus proposes a number of options for research and experiments, resulting in a more substantive base of IA knowledge and discussion. These results could become components of such a new IA framework, for discussion and initiatives and rapid prototyping for a new strategy for small high-tech countries.

4  This case was presented by a Belgian professor of finance, during a PROGRES colloquium by the Geneva Association 2000 in Hamburg, Germany.

Chapter 5

Discussions of Further Dimensions

This section will discuss a number of further dimensions of interest to bridge the IA competitiveness gap for Sweden, and other small high-tech countries, from economic, social and environmental perspectives.

5.1  Development and Digitalisation The coordination of intangibles is not limited to localised geographies but should be considered global in nature given today’s digitalised world. It can be seen as an informal network of collaboration between actors on basis of history, culture, etc. These informal collaborations, within and in between countries, indicate a first step towards new institutional development and learning. It will likely be followed by more regulatory arrangements which may then constitute the new economic, social and environmental system. In a sense, these could perhaps be seen as poly-centric organization or markets, which is a form of voluntary cooperation between sovereign government agencies and firms. It can result in more efficient outcomes than centralized government administrations and is an alternative to fully organized markets with property rights. An example here can be MOOC (Massive Open Online Courses) where universities cooperate on specific classes. The multiplier effect of digitalisation in knowledge sharing far outstrips that of the printing press and the Gutenberg revolution. However, the challenge is in using the vast supply of digitalised information in learning institutions for increased productivity in education. This goal of productivity that has yet eluded even MOOC players such as Udacity, Coursera, edX and others. Although progress has been made, it appears that it is quite difficult to go beyond rather technical subject matters. However, a recent research study involving a survey of MOOC course completers – comprising about 5% of all who sign up for MOOCs (Ho et al. 2014) – showed that 72% reported career benefits and 61% reported educational benefits, with © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 E. Ullberg et al., Intangible Asset Gap in Global Competitiveness, SpringerBriefs in Business, https://doi.org/10.1007/978-3-030-55666-2_5

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p­ eople from developing countries more frequently reporting benefits from taking MOOCs (Zhenghao et al. 2015). See Figs. 5.1 and 5.2. Business processes appears even more affected by digitalisation than education processes, with a corresponding IA shift to design and maintenance. The global free flow of information means that some nations will develop mechanisms to turn such information flows, a kind of intangible, into better productive use. Business processes is clearly one way to achieve this; industry 4.0 (see Fig. 5.3) and artificial intelligence are also alternatives. Understanding the effects of IA and their productive use in the digitalised economy is therefore one of the proposed projects.

Fig. 5.1  The Educational Benefits of MOOCS (Zhenghao et al. 2015) As reported by those who stated career benefits as their primary reason for completing a MOOC. CAREER BENEFITS TANGIBLE

33%

Any

Found a new job

26 9

Started my own business Received a pay increase Received a promotion

3 3 INTANGIBLE 85%

Any

62

Enhanced skills for current job 43

Improved candidacy for a new job 19

Changed to a new career Other

9

SOURCE COURSERA SURVEY DATA

Fig. 5.2  The career benefits of MOOCs (Zhenghao et al. 2015)

© HBR.ORG

5.2 SDGs and Beyond

59

Fig. 5.3  The fourth Industrial Revolution (Lejeune 2017)

5.2  SDGs and Beyond The challenges of integrating the economic, social and environmental concerns in the aforementioned triple-pronged policy approach remains an outstanding issue of concern. An attempt to create coherent goals covering most of these issues has been the 17 Sustainable Development Goals (SDGs), launched in 2015 (see Fig.  5.4). These were developed as a follow-up to the 8 Millennium Development Goals (2005–2015) inspired by Professor Jeffrey Sachs, which had galvanised unprecedented efforts to meet the needs of the world’s poor. The SGDs serve as goal posts to measure progress in human betterment with both targets and indicators, but are essentially social and environmental political goals. Importantly, the SDGs do not include an explicit goal related to intellectual property or capital, despite these intangible assets being of critical importance in the global economy today, with the potential to improve the conditions of many countries suffering from poverty, social misery and environmental catastrophes. The eighth goal, decent work and economic growth, aims to achieve an ambitious 7% gross national income (GNI) growth rate for less developed countries (sub-goal 8.1), higher productivity through technology upgrading and innovation (sub-goal 8.2) and promote development-oriented policies that support creativity and innovation and encourage micro, small and medium enterprises (MSMEs) (sub-goal 8.3), with the last being measured as “the proportion of informal non-agriculture employment, by sex.” Nowhere does there appear to be an explicit mention of the intellectual property or capital, which are critically important in economic development. The proposal is therefore to develop a follow-on project investigating the link between the SDGs and intangible assets.

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5  Discussions of Further Dimensions

Fig. 5.4  The 2015 Sustainable Development Goals

5.3  Viewing Unicorns Through the Lenses of Intangibles Israel is well known as The Start-up Nation1 of the world, moving from being known for oranges to world-leading high-tech in less than 40 years. A recent concept of fast growing companies are the unicorns, which are start-ups valued at US$1 billion or more (see Fig. 5.5). In this area China is clearly making a splash, catching up with the rest of the world at breath taking speeds, through implicit IA policy. For example, China reached one million patent applications in 2016 and its universities have been rising up the ranks of various benchmarking reports, as guided by the recognized Shanghai index. As part of its long-run strategy, the country’s focus has always been on being “the intellectual leader of the world”2, incidentally creating the first patents system in 1985, 20 years before the private land right system of 2006. While the US is still the front runner in terms of global intellectual leadership, it is no longer alone in the race, with a much more multi-lateral world economy being established. As explored earlier, today’s digitalised economy means that IA is playing an increasing role in enabling nations to stay competitive on the world stage. Developing the taxonomy and measures of IA for these unicorns is therefore a proposed project.

 See “The Start-Up Nation” (Senor and Singer 2011)  Private communication with a Chinese WTO negotiator around 1999.

1 2

5.4 Sustainable NIC (SNIC)

61

Fig. 5.5  The unicorns of the world as of 2017. (Source: WEF)

5.4  Sustainable NIC (SNIC) In 2014, when two of us authors, Professor Leif Edvinsson and Professor Carol Lin, met in a workshop in Malmö, Sweden, we talked about the possibility of a totally different economic landscape driven by the advancement of information and communication technologies (ICT). At that time, smartphones had already become popular, yet the Internet of Things was not well known. We envisioned the power of networking, connectivity, and contactivity and together we drew a new map capturing NIC 3.0 or sustainable NIC (SNIC) (see Fig. 5.6). Our rationale was that, within ten years, prevailing issues of concern would look quite different. That is, some popular indicators would become less important (e.g. years of education), while other issues would surface (e.g. future energy supply, cyber security). As a result, a 44-indicator SNIC model has been developed and validated. We used a set of common terminologies to describe the simple concept that education, public structures, health, and regeneration capacity would become the four pillars of a healthy nation in the future. Firstly, education is the backbone of societal development. Rather than focusing on years of education and pupil-teacher ratios, we regard scientific education, management education, and language skills as being more important once a society has advanced to a certain level. In turn, good public structures, such as future energy supply and legal and regulatory frameworks, facilitate societal development. Public health is an enhancer of national development and well-being; health infrastructure, pension funding and the like are therefore important. Finally, regeneration capacity, such as knowledge transfer and innovation capabilities, keeps the society viable and sustainable. Nevertheless, these four pillars need to be

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5  Discussions of Further Dimensions

Fig. 5.6  An early iteration of SNIC

c­onnected in order to maximise their respective functions. The dotted circle of ­connectivity and contactivity (CNC) is therefore the vital link that binds the four pillars together. Although the SNIC model has been in place for some time, it has not yet been published and used in practice as the building of a new database requires resources. We however believe the SNIC model will act as a good supplement of the NIC model. While the current NIC model covers a comprehensive scope of national intangible assets and serves as a basic national health check, the SNIC model can guide national leaders to act today with the future in mind, much like an intellectual vitamin taken today to strengthen a nation’s future readiness.

5.5  China’s View on IA, IC and IPR China will overtake the US to be the world’s largest economy by 2030, forecasts PwC ( 2017). But this shift has not passed unnoticed by US or Europe. It may thus be instructive to observe the recent thrusts made by the Chinese government in relation to its intangible assets. Also, the recent “wake-up call” that the US is trumpeting out throughout the world and Europe follows will likely result in a push-back on Chinese expansions. Of particular concern appears to be issues that are IPR related. In 2016, it made the change to include R&D expenditure in its GDP calculations, bring it in alignment with the general methodology adopted by other developed

5.6 Emerging Standards from the ISO

63

countries like the US, Canada and Australia, for measuring economic activity. This comes at a time where China’s R&D spending has been experiencing rapid growth, from 0.57% of GDP in 1996 to 2.08 percent in 2014. (‘China adjusts method of calculating GDP’ 2016). In recent years, China has also been placing increased focus on enabling public entrepreneurship and mass innovation, which it believes will contribute towards narrowing the country’s gap and overcoming social inequality by, for instance, enabling rural migrant workers to start their own businesses and hence promote urbanisation in previously rural areas. (‘Innovation and entrepreneurship brings economic vitality’ 2015). In early 2017, the State Council launched a national plan relating to the protection and application of IPRs, with the aim of improving its legal environment for intellectual property and strengthening its management of IPRs (‘China releases plan on IPR protection, application’ 2017). The plan puts forth a set of concrete targets: by 2020, the country should achieve 12 patents per 10,000 persons, a total of 2.2 million registered works, and a 80% degree of satisfaction among the public in relation to the country’s protection of intellectual property. Later that the same year, the State Council released a set of guidelines aimed at further strengthening the implementation of its innovation-driven development strategy by speeding up efforts to commercialise scientific achievements (‘China to further strengthen innovation-driven development’ 2017). This includes enhancing knowledge relating to IPRs and the marketing of intangible assets such as patents, as well as providing proper guidance for maker spaces and better incentive measures for the attraction and retention of local and foreign talent. The digital economy as well as advanced manufacturing and emerging industries have been specifically highlighted as sectors of interest.

5.6  Emerging Standards from the ISO The international Organization for Standards, ISO is a global membership organization, working close to WTO-World Trade Organization, as well as OECD and other global organizations. See www.iso.org Two major milestones regarding ISO were launched 2018 as well as 2019. One is on Knowledge Management, the other on Innovation Management System. It can be seen as an effort to routinize the process of handling internal processes and the systems for the critical Organizational Capital (OC). OC is also the multiplier for the other components of Intellectual Capital, i.e. Human Capital and Relational Capital. ISO 30401 is a standard for Knowledge Management, to support how organizations develop and use knowledge management system. Very much a system for Intangibles framed and turned into tangibles. ISO30401:2018.

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5  Discussions of Further Dimensions

Fig. 5.7  ISO 56002:2019 overview. (Source RI.SE)

ISO 56000 is a group of Innovation Management approaches on standard p­ rocess design for Innovation Management. It might be seen as a guidance to challenge the established approached as well as handle uncertainty and risk more effectively. ISO 56002:2019 (Fig. 5.7).

Part III

Closing the IA Gap

Chapter 6

Strategic Initiatives

These conclusions focus essentially on Sweden. A similar program of strategic ­initiative must be developed for each nation, preferably in a workshop format. However, several of the proposed initiatives for Sweden are of international scope and are therefore likely useful for other small high-tech nations. Even the national initiatives may be useful as most modern countries are organized in a similar hierarchical-­functional way and have similar problems, in particularly in coordination among agencies of new cross-the-board issues with no natural institutional home, or “champion”, like IA. A key strategic conclusion is that incentives to learn are needed to counter observed complacency in both business and academia. This pre-study provides concerted signals that Sweden is losing its position among the IA elite whereas the public narrative is still that of an “IA super power”. Sweden appears to be “resting on its laurels” but has all the resources to retake its position by a new, or renewed, policy initiative. This challenges the communication and awareness of what strategy and initiatives need to be undertaken both at a national and enterprise levels to remedy such loss of position, and in particular, which actor would be best placed to drive and coordinate IA efforts in Sweden. Today, IP, IC and IA issues appear scattered across many agencies with large gaps in coordination. A key conclusion is that risk of failure (in business), loss of careers (in academia) and pensions (for all but the most financially independent) may hinder all-important learning by experimenting with new things, which projects to further invest in, etc. Instead, low-risk decisions are made on the margin, guaranteeing, in the short-run: business, career and pensions. As the rest of the world is getting highly educated and strive for influence and a better life, incentives to learn are needed to counter observed trends of complacency, and contribute further to global IA. This is a key strategic conclusion and some of the proposals aim at addressing this apparent deficiency in incentive by aiming at reducing risk of failure, career and wealth instead making them–the failures, falsification and philanthropy–part of a learning the new. © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 E. Ullberg et al., Intangible Asset Gap in Global Competitiveness, SpringerBriefs in Business, https://doi.org/10.1007/978-3-030-55666-2_6

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Based on the pre-study results and discussions in Chaps. 1, 2, 3 and 4 we propose to develop a strategy to close the IA gap consisting of initiatives at the national and enterprise level along different tracks: • Coordination of IA-related initiatives to ensure traction and buy-in among various stakeholders; • Awareness building initiatives to increase the level of understanding and awareness relating to IP, IC and IA; and • Initiatives which expand our understanding of IP, IC and IA by exploring new and relevant areas for research. Incentives to learn would include competitions in learning, access by industry and extended philanthropic funding from new ventures like ICT and AI. These initiatives aim at better informing a policy discussion, while building a global team to engage with IA. Table 6.1 provides an overview of the proposed initiatives and our assessment of their level of strategic importance and urgency, linked to different levels of engagement across the general public, the national government, and among enterprises.

6.1  Coordination Initiatives 6.1.1  Strategic Hub A strategic hub for IA initiatives could serve as a coordination mechanism and act as a “start engine” to begin acting on the suggested initiatives. We propose the prototyping of such a strategic hub during 2018  in order not to lose momentum as describe in the above sources. This hub can be based inside Sweden or outside Sweden with roots in a broader EU context or global context, and play a central role in important strategic alliances with various national and international actors across the spectrum of relevant stakeholders (government, industry including SMEs and entrepreneurs, academia, not-for-profit enterprises, etc), for instance, exploring an alliance with WEF to hold a new Davos meeting in Stockholm with discussions centred around IP, IC and IA. The development of the strategic hub can be kicked off with interactive workshops and webinars on IC and IA, with relevant actors such as Vinnova and PRV.

6.1.2  IA Contract An IA contract for leveraging hidden IA of Sweden is discussed. This could include an obligation to patent protect and license research by universities funded by government. Think of this project as a “social contract” for IA, cutting across economic, social and environmental concerns, really creating incentives to learn!

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6.1 Coordination Initiatives Table 6.1  Strategic initiatives to bridge the IA gap and their importance and urgency

Expanding our understanding

Awareness building

Coordination

General public

National government Enterprises 6.1.1 Strategic hub or lab (beginning with workshops, webinars, etc) 6.1.1 WEF Alliance 6.1.1 IA Alliances 6.1.2 IA Contract 6.1.3 IA Investment Fund 6.2.1 IA Week (+ universities) 6.2.2 IA Ranking 6.2.3 IA Cheques

6.2.4 IA Oscars 6.2.5 IC & IA Lexicon on Wikipedia 6.2.6 IA on Youtube 6.3.1 IA Observatory 6.3.2 Corporate IA database 6.3.3 IA, Digitalisation and Competitiveness 6.3.4 Trade in Ideas 6.3.5 SNIC 6.3.6 Bridging ELSS to economic models 6.3.7 Developing MOOC curriculum

Legend: Colours denote ranking of strategic initiatives according to level of importance and urgency High Middle Low

6.1.3  IA Investment Fund An investment fund based on “IA rating” of companies and countries (bond market). A Venture Fund with Aeropa is proposed.

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6.2  Awareness Building Initiatives 6.2.1  IA Week A similar initiative to the Japanese “IA -week”, a Pentahelix initiative held in during last 13 years, is proposed as an annual awareness building activity across government agencies, businesses, in OECD style format of key notes and discussions, round tables and social events over at least 2 days.

6.2.2  IA Ranking At some point an international ranking will be needed. This likely requires an International conference. Compare Shanghai index, which is based in the rules of ranking academic contributions by publication, research efforts, staffing. Such rankings should contribute to knowledge ranking like Global Knowledge Index (GKI) initiative by UNDP in cooperation with (i.e. funded by?) MBR Foundation.

6.2.3  IA Cheques A key proposal, based on a solid economic understanding, are incentives to take risks in business and academia and private. This proposal is a about organizing such no-strings-attached grants but for IA, based on the Israeli and Chilean experience with high-potential ideas in science and technology. This requires a substantial increase in the scientific competence of the agency/institutions handing out such “IA cheques”. Action research of IA value creation, to inspire more prototyping and reveal new value patterns by usage of e.g. IA checks applied to SME.

6.2.4  IA Oscars Shape an Annual award for societal contribution in a global competitive arena: An “Oscar” in IA, potentially funded by PRV, Vinnova and private actors. Purpose: work with “hidden inventions”, reward people who make a difference.

6.3 Initiatives which Expand our Understanding

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6.2.5  IP, IC & IA Lexicon on Wikipedia A smaller, but quite important initiative in awareness building is to develop a “reference” lexicon on IP, ICA and IA. Such awareness building will clarify the meaning of these component and also allow for a broad participation of researchers from all over the world to contribute towards a common goal of awareness.

6.2.6  IA on Youtube In order to popularize and increase awareness, Youtube recording of Swedish IA initiatives, in particular including this pre-study material. The format of Podcast interviews could also be used for knowledge share.

6.3  Initiatives which Expand our Understanding 6.3.1  IA Observatory This is the key strategic initiative where the beginnings of the knowledge generating arm of a strategic hub, in form of an IA Observatory-Lab for research & prototyping, would be initiated. This initiative needs would start with the built-up global team and leveraging extant relations with international bodies and others.

6.3.2  Corporate IA Database A Database of corporate SME IA assets would be created to better inform policy.

6.3.3  IA, Digitalisation and Competitiveness A very major issue today is the implications of digitalization on economic, social and environmental policy. This is a multifaceted study with many parts. As digitalisation has profound implications on competitiveness through its implication on IA.

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6.3.4  Trade in Ideas and Incentives to Learn If we separate IP from IC and IA this opens a market for the IA to which private property rights can be assigned. A way to think about this is then as asset markets. These markets have been studied to some length for patented technology, based on the proposed concept of Trade in Ideas (Ullberg 2012). Similar dynamism can be expected for other IP, copyrights, etc. A project is therefore proposed to further investigate the institutional performance and behavioural properties of such markets. This project thus ties into the trade surplus in Sweden of IPR. It would begin to evaluate, at a national and company level the returns on these assets, the position of Sweden compared to other small nations and identify suitable partners for Sweden in such development. 6.3.4.1  Managing Risk in Policy Agenda through Incentives to Learn Creating incentives to learn would be a major policy issue and based on better managing the risks in the economic system of learning “the right stuff”, motivated by the demand side: economy/business, society and environment.

6.3.5  Sustainable NIC (SNIC) This project would upgrade current NIC models, maps with new statistics to captures some more sustainable aspects. This proposal relates to including business relations as parameter, suggesting that sustainability can only be achieved by markets, emphasizing low transaction costs.

6.3.6  Bridging ELSS to Economic Models Current literature in IA has developed quite independently from the economic literature, as it has its root in accounting for off-balance sheet business assets. A systematic literature review to better connect ELSS model with the economic literature is proposed. Hypothesis formulation of economic nature, based on new models, can then be tested and presentation of the data in pedagogical forms.

6.3.7  Developing MOOC Curriculum Using the tools of digitalization, a new curriculum for Massive Open Online Courses (MOOC) would be developed as education in IA.  This likely requires freed- up university initiatives. Credits for such classes provide incentives to learn.

Chapter 7

Workshop

Workshops (or colloquiums) are proposed to address the policy challenges of small countries, starting with Sweden, the Nordics and other small high-tech countries. The workshops are proposed on two themes: policy initiatives and industry initiatives. The first has an emphasis on what policy could do to create the incentives through institutional and taxation policies, and the second what key industrial owners could do to initiate private initiatives through an investment fund.

7.1  Policy Workshop The policy workshop follows the strategic themes outlined in Chap. 6 Strategic initiatives, on creating a strategic hub or lab at the national level for coordination of the IA issues across government agencies and existing industry cooperation. Such a laboratory would then allow for strategic initiatives to carry out prototyping and experimenting with an integrated IA approach for a possible coordinated competitive agenda that integrates economic, social and ecological aspects. The proposal is to create such a laboratory as an outcome of a strategic policy workshop or colloquium with representatives of government, industry and academia. Both these initiatives aim at organizing the work – coordinating today’s disparate field of actors at various levels of awareness– to close any IA gap for global competitiveness as the economic system moves from capital and labour to intellectual capital and human ideas.

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 E. Ullberg et al., Intangible Asset Gap in Global Competitiveness, SpringerBriefs in Business, https://doi.org/10.1007/978-3-030-55666-2_7

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7.2  Industry Workshop The industry workshop follows thematic investments and relies on the creation of an institutional investor or an investment fund. There are many models for this, for example the Danish Investment Fund. However, the purpose would be to create awareness of IA and existing tools to measure IA starting with what has been outlined in this book, then create a strategic agenda, where to invest for competitiveness of the industry or industries. This initiative allows thus to create a very market-driven approach but with a national strategic agenda in mind, where participants primarily from industry but also from policy making are present together with academia. A key point discussed with industry is a general need for better cooperation with policy makers. Such a lab would then be market driven, and the real economic, social and environmental demands would drive the strategic policy discussion, both for business policy, research policy and government policy. Importantly, such a workshop would have an international focus and representation as small-countries wealth relies to the most part from export oriented economic policy. These issues then quickly become global but the laboratory would be able to be a coordinating laboratory for worthy initiatives.

Part IV

Emerging New Trade Structures and IA

Chapter 8

The Urgency of the Topic of IA for Sweden

The most recent challenge of trade does not come from economics, geopolitics or the environment but nature itself. The COVID-19 virus has shown how incredibly vulnerable the economic system has become, relying on “just-in-time”, weak international institutions that do not enforce international rules, like WTO. It lays bare the weakness of these institutions, some only 20 years old. A reform is needed. This makes the creation of options necessary meaning regional trade or even intra country-­trade. Just-in-time protocols showed that most “fat” was taken out of supply chains and some redundancy is needed. Calls for de-globalization rises with the prospect of lesser global specialization and thereby growth. All these factors impact head-on countries depending on an export-oriented strategy since long, including Sweden. Free-trade solutions, including more efficient regional and international rules are needed, which take into account such natural disasters, geopolitics and economics. In a sense the triple-policy agenda got another sister: global pandemics and other international natural disasters. Anticipation and outlook, based on post-2000 growth rates, is that services exports will pass goods exports in 2039 and IP export in 2039 will be at the level of goods in 1999. Immediate attention must be the services export. The most strategic issue is IP see Fig. 8.1. These issues will require a strategic policy from Sweden, in turn shifting the investment towards intellectual capital and human ideas. To do this, more ideas must have a chance to survive until they arrive at the policy table. Awareness of these issues are needed, and national initiatives are needed post-COVID-19 to not only assess the “new” risks but manage them in a slow-­ moving international free-trade system. This calls for yet another workshop or colloquium to retake the political and economic initiative together with the new future pandemic concerns.

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 E. Ullberg et al., Intangible Asset Gap in Global Competitiveness, SpringerBriefs in Business, https://doi.org/10.1007/978-3-030-55666-2_8

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8  The Urgency of the Topic of IA for Sweden

Fig. 8.1  Anticipation of trade 2039. Services will pass goods. IP will be at good’s level 1999

Appendices

Taxonomy/Glossary of IA & IC Terms Digitalising and Digital Assets Digitalising, i.e. the digital packaging of knowledge into, for example, knowledge recipes, is a core intangible when seen through the lens of IA and IC. Digitalising make it possible to share and manage knowledge, and might act as a multiplier or springboard for human capital. Future Center A Future Center, at its core, acts as a prototyping space for an organisation’s structural capital (SC) to support and multiply the potential and development of its human capital (HC). Its dynamics can be captured in the formula SCxHC>1. The first Future Center, the “Skandia Future Centre”, was founded in 1996 by Leif Edvinsson when he was the IC Director for Skandia (‘The Pioneer - Skandia Future Center’, 2015). Since then, the concept has been implemented in many locations around the world with success. For example, the Dutch government started five Future Centers for the public sector as units under its various ministries, with the largest one being the LEF future centre under the Dutch Ministry of Infrastructure and the Environment (Rijkswaterstaat, n.d.). One of the Netherlands’ largest banks, ABN Amro Bank, also developed an initiative capturing the Future Center concept in 2007 called Dialogues House that aims to serve as an inspiring meeting place plus service innovation laboratory (‘Dialogues House’, n.d.). In June 2017, France’s President Macron inaugurated the new Station F in Paris, said to be the largest startup campus in the world (‘Station F’, n.d.), with next one, Camp.fr, to be inaugurated in Aix-en-Provence in autumn 2017 (‘thecamp’, n.d.). The Future Center Alliance connects Future Centers and similar dedicated innovation environments, spanning from Europe to Asia (‘futurecenteralliance’, n.d.). Recently, the Future Center Alliance in Japan has developed this concept further into Wiseplace (‘Future

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 E. Ullberg et al., Intangible Asset Gap in Global Competitiveness, SpringerBriefs in Business, https://doi.org/10.1007/978-3-030-55666-2

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Center | Asia Pacific Intellectual Capital Centre’, n.d.), an ecosystem of Future Centers, Innovation Centers, and Living Labs, for the purpose of developing societal renewal initiatives. The Future Center concept has now been experienced by thousands of people around the world, and can be seen as a platform for prototyping and promoting IA and IC, with potential future iterations to come (Edvinsson, 2017). Future Center 3.0 has been described by Leif Edvinsson as a platform for connectivity and contactivity – a type of relational capital, a thoughtware, a wise place, and a testbed for societal innovation, illustrated with a simple formula: 1 + 1 = 11. Gapminder Gapminder, named under the inspiration of the phrase “Mind the Gap”, is a software program that visualises the dynamic statistics of national IC, and was developed by the late Professor Hans Rosling. Human Capital Human capital includes knowledge, wisdom, expertise, intuition, and the ability of individuals to realize national tasks and goals. This focal area also includes the values encompassed within the culture and philosophy of the nation. Human capital constitutes a population’s total capabilities as reflected in education, knowledge, health, experience, motivation, intuition, entrepreneurship and expertise; in addition, a highly skilled labour force, the availability of scientists and engineers, a female labour force, and health (life expectancy, physicians) are also good indicators. IA IA is short for intangible assets. See “intangible assets” for a detailed description. IC IC is short for intellectual capital. See “intellectual capital” for a detailed description. IC Liabilities Intellectual capital is more appropriately derived as a net figure (subtracting intellectual liabilities from intellectual assets) rather than a mere summation of the organization’s identified intellectual assets. For example, when a company fails to convert its human capital into future sales, it may suffer loss of reputation due to its inability to convert its human capital investment. That is, there will be a reduction (or impairment) in customer capital and organizational performance. IC Navigator The Skandia Navigator management and reporting model aims to provide a balanced, overall management perspective of the company’s intellectual as well as financial capital. The ratios and indicators of intellectual capital are arranged according to four areas of focus: Customer Focus, Human Focus, Process Focus, and Renewal & Development Focus. IC Rating The IC Rating model contains three distinct parts: the vision/mission and business idea, the business strategy, and the surrounding business conditions. Please refer to Fig. 3.1 for the IC rating model.

Appendices

81

IC Risk Intellectual capital, like other assets, runs the risk of being wrongly utilized or ­stolen. To prevent such incidents from happening, a patented IC risk system, filed by John Blasko, was successfully approved in December 2002. The system has, firstly, a database with patent and patent application information as is typically found in patent docketing systems. The system has a second database for storing information related to risk elements associated with the acquisition of inventions, the prosecution, maintenance and enforcement of patents, and the practicing of inventions. The elements of risk may be weighted. The system graphically displays the weighted risk information such that the user has a visual indicator of the relative risks associated with a patent asset or a patent prosecution transaction. IC Value Scheme A cascade model which illustrates the building blocks that together form the foundation of the company’s intellectual capital and its relation to market value. Intellectual capital is broken down into human and structural capital, which is further broken down into customer and organizational capital. This is then classified as process and innovation capital. Innovation Capital Innovation capital relates to the renewal strength of a company, expressed as intellectual property, i.e., protected commercial rights and other intangible assets and values, such as knowledge recipes and business secrets. Intangibles Intangibles are not made of physical substance, hard to be assessed, felt, measured or moved;  incapable  of  being perceived  by the sense of touch,  as incorporeal or immaterial things; impalpable; not definite or clear to the mind, hard to value; existing only in connection with something else. Examples of intangibles include: self-confidence, responsibility, goodwill of a business Intangible Assets (IA) and Intellectual Capital (IC) Intangible assets is a general term covering anything non-physical, such as patents, trademarks, copyrights and business methodologies, goodwill and brand recognition. Intellectual capital is a special term that, in this report, covers, at enterprise level, human capital, structural capital, and social capital; and at national level, human capital, market capital, process capital, and renewal capital. Intangible Assets (IA) and Tangible Assets Tangible assets include land, vehicles, equipment, inventory, stocks, bonds and cash. Intangible assets, unlike tangible assets, are assets that are not physical in nature. Examples of intangible assets include: Corporate intellectual property (e.g., patents, trademarks, copyrights), business methodologies, goodwill and brand recognition.  performance events,  licensing agreements, service contracts, computer software, blueprints, manuscripts, joint ventures, medical records, permits, and trade secrets.

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Indefinite intangible assets can exist indefinitely, for example the brand name of a company, which would be valid as long as the company exists; definite intangible assets have a limited and defined lifespan, for example patents with expiry dates. Related Wikipedia entry: https://en.wikipedia.org/wiki/Intangible_asset Intellectual Assets An intellectual asset is an investment in, for example, brands, design, technology or creative works. The laws that protect the value of such assets are known collectively as intellectual property. In short these are legally protected intangibles. As an asset it is from accounting viewpoint possible to own it and include it in the balance sheet. Examples of intellectual assets include: company names, domain names, logos, names of clubs or restaurants and newspaper mastheads. Intellectual Assets Initiative in Japan (WICI) Japan launched WICI – World Intellectual Capital/Assets Initiative in 2007, advocating the concept from financial reporting, business reporting and integrated reporting and created key performance indicators (KPIs) for IAbM (intellectual assets based management). Since then, annual WICI symposium was held at year end in Japan, inviting experts from all over the world. As of 2014, WICI with its global partners have developed the KPIs for the following industries: Electronic components, Pharmaceutical, High Technology, Automotive-automobile, Telecommunications, Mining, Fashion & Luxury, Electricity, and Oil & Gas. In 2013, WICI-IIRC (International Integrated Reporting Committee) partnership was formed. Intellectual Capital (IC) Intellectual capital (IC) is the intangible value of a business, of which intellectual property (IP) is but one component. It covers the organisation’s people (human capital), the value inherent in its relationships (relational capital), and everything that is left when the employees go home (structural capital). The term is used in academia in an attempt to account for the value of intangible assets not listed explicitly on a company’s balance sheets. Intellectual capital is often considered a hidden asset. It might broadly be defined as the collection of all informational resources a company has at its disposal that can be used to drive profits, gain new customers, create new products, or otherwise improve the business. As technology and process improvements become more of a differentiating factor within modern enterprising, intellectual capital is likely to become an even stronger force in the marketplace. There have been several efforts to describe IC further, such as: • • • • •

Invisibles; Intangibles; Roots for the fruits (see Fig. 1); Future earnings potential; and Derived insights of head value.

On a national level, intellectual capital refers to  national intellectual capital (NIC), consisting of human capital, market capital, process capital and renewal capital.

Appendices

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Relational & Culture

Flow

future

present

past Assets

IC = Derived insights about hidden VALUE for Future Earnings Capabilities

Fig. 1  “Roots for the fruits” perspective to IC

Examples of IC include: At organizational level: employee knowledge, business systems and any proprietary information that may provide the company with a multiplier effect and competitive advantage. At national level: human development index, image of country, government efficiency and agility, and entrepreneurship. Related Wikipedia entry: https://en.wikipedia.org/wiki/Intellectual_capital Intellectual Property Intellectual property (IP) is property, such as an idea, invention, or process, that derives from the work of the mind, intellect, and original  creative  thought,  such as  patents, copyright  material,  and  trademarks. The IP system aims to foster an environment in which creativity and innovation can flourish. Examples of intellectual property include: inventions, literary and artistic works, designs, symbols, names and images used in commerce Related Wikipedia entry: https://en.wikipedia.org/wiki/Intellectual_property Intellectual Property Rights The definition of intellectual property (IP) rights are based on the  Trade-­ Related Aspects of Intellectual Property Rights (TRIPS) agreement. IP rights are given to the “true and first” inventor, or creator, of the work of art. This “art” has expanded from patents in 1474 to now seven different rights in TRIPS, each covering a different creative area. Their purpose is to encourage sharing of private information and honoring the inventor or creator by giving exclusive, transferrable and

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licensable rights, thus creating both a social and economic exchange in human idea s (Ullberg, 2012). They replaced royal privileges or guilds for an open system of private ownership of rights. The seven rights under the TRIPS agreement are: • Copyright and related rights (i.e. the rights of performers, producers of sound recordings and broadcasting organizations); • Trademarks including service marks; • Geographical indications including appellations of origin; • Industrial designs; • Patents including the protection of new varieties of plants; the layout-designs of integrated circuits; and • Undisclosed information including trade secrets and test data (‘WTO | intellectual property (TRIPS)  - what are intellectual property rights?’, n.d.) Patents protects a solution to a technical problem, either used in a product or a process. It creates a market in patented technology and strong incentives to both invest in further research and development and exchange  – license  – in complex collaborations. For example an car contains about 3000 patents and a smartphone about 20,000 or more, so one can say that what you really are buying is a bundle of patents! Copyrights protected in law protect a work of art such as books, music, painting, sculpture, computer programs, films, etc. They are generally valid for 70 years but some rights are indefinite (like Mickey Mouse in the USA). The rights can be used for “fair use”, such as in documentaries, so they are not absolute. Trademarks protect a name essentially used in branding of products and services, countries, etc. These are the most used and currently likely the most valuable. For example, IBM, Google, etc. Industrial design allows for the protection of a certain physical design of a products or creative work. For example, some Italian designed cars are not only are fast but have an elegant look to them. Geographical indication is the newest type of IP right and originally intended to protect French Wines, but are now used more broadly for coffee (Ethiopian Coffee) and other products or services connected to the unique geographic location, thus can protect a certain trade. The layout-design of integrated circuits protects in a sense both the product and the process in chip manufacturing. Undisclosed information is in a sense the alternative to IP rights and protects trade secrets and test data. This comes into play with, for instance, the copying of a secret formula (for example Coca-Cola’s formula), which would disclose too much beyond what can be excluded, or the premature disclosure of the health effects of  ­potential  pharmaceutical drugs, which may require a decade of testing before they are approved. The “quality” of a product is protected in this way.

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Knowledge Café A metaphor alluding to the fact that knowledge workers might not work at the office but at an open, inviting environment, like a café. It is a knowledge recipe for the workplace of tomorrow for knowledge workers. Leadership for IC IC leadership is the bridge between human capital, organizational capital and customer capital. It creates congruence and multiplicative effects between strategies, structures, systems and cultures in the business environment, market and operating environment in which an organization works, and can be described using a leadership index. Market Capital Market capital refers to the general assets embodied in the nation’s relationship with the international market. It is the aggregate of a country’s capabilities and successes in providing an attractive, competitive solution to the needs of its international clients, a country’s investment and achievements in foreign relations, coupled with its exports of quality products and services. Navigation Intelligence Navigation intelligence relates to the capability to navigate intellectual as well as financial capital based on an external perspective. It is the focused capability to solve emerging issues where an enterprise has a mandate. NIC National intellectual capital (NIC) is comprised of the knowledge, wisdom, capability, and expertise that provides a country with a competitive advantage over other countries and determines its potential for future growth. The NIC model, comprising human capital, market capital, process capital and renewal capital was first developed by Professors Carol Y.Y. Lin and Leif Edvinsson (2011) and later refined to NIC ELSS (Lin, Edvinsson, Ståhle, Ståhle) model (Ståhle, Ståhle, & Lin, 2015). Related Wikipedia entry: https://en.wikipedia.org/wiki/National_Intangible _Capital Organizational Capital Organisational capital relates to systematized and packaged competence, plus systems for leveraging the company’s innovative strength and value-creating organizational capability. It consists of process capital, culture and innovation capital. Related Wikipedia entry: https://en.wikipedia.org/wiki/Organizational_capital Process Capital Process capital is the cooperation and flow of knowledge that require structural intellectual assets, such as information systems, hardware, software, databases, laboratories, and national infrastructure, including transportation, information technology skills, communications and computerization, technological readiness and telecom services, personal computers, cellular subscribers, cyber security, quality

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scientific research institutions, knowledge transfer, a legal environment for ­entrepreneurship, a minimum number of days to start a business, a quality management system, and agricultural productivity. Related Wikipedia entry: https://en.wikipedia.org/wiki/Process_capital Renewal Capital Renewal capital refers to a nation’s capabilities and real investments made in an effort to increase its competitive strength in future markets, which, in turn, encourages future growth. Renewal and development assets include investments in research and development, patents, trademarks, start-up companies, the number of scientific publications, the number of patents registered in the US, EPO patent applications, total expenditure on R&D, and capacity for innovation. Skandia Future Center Skandia Future Center (SFC) is an organizational laboratory for prototyping organizations and work methods of tomorrow. It acts as a prototyping workspace for channeling, organizing and stimulating power of innovation. See “Future Center”. Structural Capital Structural capital is the value of what is left in an organisation when the employees – the human capital – have gone home. It includes databases, customer lists, manuals, trademarks and organizational structures. Related Wikipedia entry: https://en.wikipedia.org/wiki/Structural_capital Utility Patent A utility patent is a patent that covers the creation of a new or improved – and useful – product, process or machine. Also known as a “patent for invention,” it prohibits other individuals or companies from making, using or selling the invention without authorization. Related Wikipedia entry: https://en.wikipedia.org/wiki/Utility_(patent) Wissenskapital Wissenskapital, which is German for knowledge capital or intangibles, is the German concept for IA and IC, and implicitly captures the connotation of knowledge flow. When applied to the balance sheet it is referred to as Wissensbilanz, i.e. an intellectual capital statement. Refer to Sect. 3.1 for a detailed description of Wissenskapital and Wissensbilanz.

NIC Methodology The modified and expanded 48-indicator ELSS NIC (named NIC for brevity) model was finalized through two rounds of Delphi method, rated by 16 experts who are NIC researchers. To further assure the validity of the selected variables in measuring the four constructs (human capital, market capital, process capital, and renewal capital), statistical analyses were utilized to test the measurement model. Data

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a­ nalyses showed that all the variables are significant at α = 0.05, which means the selected variables are valid indicators to represent the four component capitals and support the validity of this measurement model. Using the variables listed in Figs. 2.1 and 2.2, we collected data for the maximum number of 59 countries from the IMD database. The data analyzed for this report, describes 59 countries over a period of 18 years, from 2001 to 2018. In this study, there are two different types of data: data with an absolute value, such as “patents per capita,” and data with a qualitative rating based on a scale of 1 to 10, such as “image of country.” Although subjective, qualitative rating on the degree or magnitude of certain variables is unavoidable, as evaluating intangible assets cannot be fully represented by merely adding up absolute numbers. For a meaningful integration of the quantitative score and qualitative rating, the ratio of the absolute value relative to the highest value of each quantitative variable was calculated and multiplied by 10 to transform the number into a 1-to-10 score. The data transformation procedures have been repeated for all numerical indicators of human capital, market capital, process capital, and renewal capital. The NIC database is on Excel. The Excel system automatically adjusts for missing values by not including them in the calculation of average indicator values. In terms of NIC indicators, a veteran intangible asset scholar, Roos (2017) posed the following three questions for relevant researchers: • “Is the chosen set of indicators complete?” • “Are the indicators distinct from each other so that no double counting takes place?” • “Is construct validity in place for the indicators chosen as relates to the construct that is to be captured?” To answer Roos’ first question, while no scholar or institution dares to say their model is 100% complete, we are confident that NIC model can be considered relatively complete. For example, IMD’s World Competitiveness Report is based on more than 340 indicators, while in contrast WEF’s Global Competitiveness Report is based on around 110 indicators, yet the latter report still has its value. When a simple model can catch a majority of the essence it intended to capture, it is considered valuable. With a modest number of indicators – 48 – NIC does not require a fleet of researchers to update the data every year for reporting and trend analysis, yet it captures the core essence of national intangible assets. Further, the NIC country ranking has been consistent with people’s expectations on top performers, with Switzerland and Nordic countries on the top 10 list. For Roos’ second question, NIC model covers human capital, market capital, process capital, and renewal capital. These capitals are distinct from yet related to one another. Human capital is the base of a nation which market capital, process capital, and renewal capital build upon. In turn, process capital is the infrastructure of a nation that facilitates market capital and renewal capital. The R&D and innovation expressed in renewal capital help enhance market capital and process capital. Indeed, dimensions of some other national intellectual capital models are similarly

88

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not distinct from each other. For example, one study used social capital, structural capital, human capital and relational capital to represent national intellectual capital (Mačerinskienė, Mačerinskas, & Aleknavičiūtė, 2016), where by definition relational capital is part of social capital. As a result, such models measuring NIC would capture these interactions and thereby do not have distinct dimensions. For Roos’ third question, the construct validity of NIC has been statistically validated before it was put to use. To further validate NIC model, two national level intangible assets ranking comparisons were made. Country ranking correlation between NIC and SPI (Social Progress Index, by Michael Porter) of the overlapped 56 countries for the most recent 3 years is .81; country ranking correlation between NIC and GII (Global Innovation Index, by Cornell and INSEAD universities) of the overlapped 57 countries for the most recent 3 years is .90. Figure 2 provides detailed definitions to the NIC indicators.

Fig. 2  NIC Indicator definitions for human, market, process and renewal capital

Appendices

89

 alaxy of Some IC and IA Actors and Bench Learning G Alliances This section lists a number of key IC and IA actors that maps the global galaxy of IA. see Fig. 3. Aalto University, Helsinki, Finland  This is one of the few universities in the Nordic Countries with a special chair for intellectual capital, Professor Pirjo Stahle. Aalto University was founded in 2010 from the merger of Helsinki University of Technology, the Helsinki School of Economics and the University of Art and Design Helsinki. The aim of the institution was to create a new innovative university combining science and technology, business and economics, design and art, and its name is a tribute to the life and work of Finnish architect Alvar Aalto. For further details: http://www.aalto.fi Areopa  Areopa is a pioneering intangibles and IC consulting firm based in Belgium. It has been working globally over the past few decades on the subject of IC and IA Management. For further details: http://www.areopa.com/ Brookings Institution, Washington, USA  This is a non-profit public policy organization based in Washington, DC. It published a report called “Unseen Wealth” in 2000, which is a report by the Brookings Task Force on Intangibles.

Fig. 3  Some global IC & IA actors

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Appendices

For further details: https://www.brookings.edu/book/unseen-wealth/ Bundes-ministerium für Wirtschaft und Arbeit  In Germany, the Federal Ministry of Economics and Labour (German: Bundes-ministerium für Wirtschaft und Arbeit) initiated a major project in 2004 for mapping the IC and intangible assets of enterprises. This involved reporting on intangible assets (German: Wissenskapital) via an intellectual capital statement (German: Wissensbilanz) and was to be included as a supplement to the traditional balance sheet. This project involved both SMEs as well as larger enterprises and spanned nationwide. As a result of this project, a list of special guidelines relating to the reporting of intangible assets was published. For further details: http://www.bmwi.de/Navigation/EN/Home/home.html http://www.akwissensbilanz.org/Toolbox/BMWI_Wissenbrosch05.pdf CADIC  As an extension of InCaS, CADIC (short for “Cross Organizational Assessment and Development of Intellectual Capital”) was launched. For further details: www.cadic-europe.org Center for Intellectual Property (CIP), Gothenburg, Sweden  The Center for Intellectual Property (CIP) is an interdisciplinary development center focused on knowledge-based business founded in 2000 through a collaboration of academia and industry. It is currently jointly governed by Chalmers University of Technology, University of Gothenburg, and Norwegian University of Science and Technology. For further details: http://cip.gu.se/ Chengchi University, Taiwan  One of Taiwan’s most prestigious higher education institutions, the National Chengchi University is regarded as one of the Asia’s most important centres for humanities and social sciences. It has been pioneering research on the subject of IC and the national IC database, the latter developed by Professor Carol Y. Lin. For further details: http://www.nccu.edu.tw/?locale=en Committee of the Regions (CoR)  The European Committee of the Regions (CoR) is an EU advisory body composed of locally and regionally elected representatives coming from all 28 Member States. It focuses on developments impacting regions and cities, including the IC of regions. For further details: http://www.cor.europa.eu/ Copenhagen Business School (CBS), Copenhagen, Denmark  The institution was an early and prominent pioneer on IC accounting together with Ministry of Economics in Denmark. European Federation of Financial Analysts Societies (EFFAS)  EFFAS is a Pan-­ European grouping of the National Societies of Financial Analysts. They have a special committee on Intellectual Capital. For further details: http://effas.net/

Appendices

91

Fraunhofer Institute, Berlin, Germany  This institute is the base of a pioneering research team on Wissenskapital (German for intangible assets), and developed concepts which they exported to countries in Asia as well as Brazil. For further details: https://www.fraunhofer.de/en.html IAM  IAM is a business media platform focusing specifically on IP. It views intellectual property as a business asset and tool, rather than simply as a legal right. For further details: http://www.iam-media.com/ IAS 38  International Accounting Standard (IAS) 38 emerged as a result of the IC community’s work in addressing the intangible value dimensions in the accounting system. IAS 38 outlines the accounting requirements for intangible assets, which are identifiable non-monetary assets without physical substance. For further details: ias-38-intangible-assets/

http://www.ifrs.org/issued-standards/list-of-standards/

ICM Group, California, USA  Through Pat Sullivan and with the help of Leif Edvinsson, the company initiated an exchange on experiences and extracting value from IA and IPR among practitioners within IP rights in California. For more information, contact [email protected]. ICMG  ICMG is a pioneering consulting firm based in Japan, provides intellectual capital management services for companies in Japan and internationally. For further details: http://icmg.co.jp/en/ InCaS  One of the major European Commission programmes emerging as an outcome of the RICARDIS programme was the development of Intellectual Capital Statements, i.e. InCaS, which was based on what was done in Germany (see Wissenskapital and Wissensbilanz). This was subsequently disseminated to several EU countries. For further details: http://www.psych.lse.ac.uk/incas/ Intellectual Capital Accreditation Association (ICAA)  ICAA is an international, non-profit association founded in Portugal in 2010. It brings together IC researchers in Portugal and from the Spanish-speaking community. For further details: https://icaa.pt/en International Integrated Reporting Council (IIRC)  The IIRC is a global coalition includes regulators, investors, companies, standard setters, and the accounting profession. For further details: https://integratedreporting.org/the-iirc-2/ Journal of Intellectual Capital  The journal is a pioneering peer-reviewed international publication dedicated to the exchange of the latest research and best practice information on IC. It is a journal under Emerald Publishing and has been online

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since 2000. It was recently accepted by Clarivate Analytics into the Social Science Citation Index (SSCI), which means that the journal will receive an impact factor when the new metrics are released in June 2018. For further details: http://www.emeraldinsight.com/journal/jic KMA  KMA is a comprehensive service provider network in knowledge management, aimed at gathering leading Austrian experience. It was established by Andreas Brandner and is supported by Austrian IA pioneers such as Professor Guenter Koch, who is the former leader of Seibersdorf Research Institute and co-founder of New Club of Paris. For further details: http://www.km-a.net/english/k4dev/ Macquarie University, Sydney, Australia  The university hosts pioneering IA and IC researchers such as James Guthrie, John Dumay and Johan Roos. For further details: www.mq.edu.au Ministry of Economy, Trade and Industry (METI), Japan  METI began their work on intangibles, or soft economics, with a special institute called Softnomics Center. For the last 15 years, METI has arranged the “Intellectual Assets” week as a pentahelix stakeholder event involving industry, academy, Nikkei stock exchange et al. to address the issues of intangibles and intellectual asset management (IAM) in relation to Japan. Taka Sumita is a key pioneer for this initiative, inspired by the developments in Germany relating to IA For further details: Japan%20METI.pdf

http://www.meti.go.jp/policyintellectual_assets/pdf/

NIC 40  This is the world’s first database for the prototyping of national IC for 40 countries over 15 years is based on 48 indicators. The database was developed at Chengchi University in Taiwan, by Carol Lin and Leif Edvinsson. For further details: www.nic40.org New Club of Paris  This forum was founded to support the agenda setting on knowledge economy for cabinets of various nations. For further details: http://www.new-club-of-paris.org NYU Stern School of Business, New York, USA  The institution attracted the pioneering researcher professor Baruch Lev, from University of California, Berkeley, to continue his IA research with them. Organisation for Economic Co-operation and Development (OECD)  For the last 30 years, OECD has been addressing the issue of intangibles and intellectual capital, by conducting international research and arranging conferences around these themes. A leading team of pioneers from OECD include Alistair Nolan and Dominique Guellec.

Appendices

93

For further details: https://www.oecd.org/sti/inno/46349020.pdf https://www.oecd.org/sti/inno/40637101.pdf https://www.oecd.org/daf/ca/Intangible%20Assets.pdf RICARDIS  The report “RICARDIS: Reporting Intellectual Capital to Augment Research, Development and Innovation in SMEs” was published in June 2006 on the role of intellectual capital reporting in the research field, and is an outcome of the work of an expert group set up by the European Commission which comprised of specialists from across Europe. For further details: en/2006-2977_web1.pdf

http://ec.europa.eu/invest-in-research/pdf/download_

Université Paris-Sud, Paris, France  The university has been pioneering IC and IA issues for more than a decade. It hosts an annual global summit on these issues, and has an European Chair on IC Management, led by Professor Ahmed Bounfour, who is also the Executive Chairman of the New Club of Paris. Waseda University, Tokyo, Japan  The university, through Professor Hanado, was one of the initiators, together with METI, for the work on intellectual asset management (IAM) World Bank  The global institution has initiated much knowledge management and IA-related reporting through, among others, Carl Dahlman and Nicolas Gorjestani. World Intellectual Capital Initiative (WICI)  WICI, the world’s business reporting network, is a private/public sector collaboration, initiated by the big accounting firms, aimed at improving capital allocation through better corporate reporting information. For further details: http://www.wici-global.com/

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Author Index

A Alcorn, B., 58 Aleknavičiūtė, R., 88 Arrow, J.K., xvii B Blair, M.M., 49 Bloom, N., 1 Bontis, N., 14–16 Bounfour, A., 14, 15, 93 C Carlucci, D., 14, 15 Christensen, G., 58 Chuang, I., 57 Churchill, W. Sir, 3 E Edvinsson, L., xviii–xix, 4–7, 14, 15, 32, 37, 61, 79, 80, 85, 91, 92 Emanuel, E.J., 58 Eriksson, N., 58 F Fölster, S., 50 Forrester, J., 42 Frankel, L., 54 G Gu, F., 4

H Hanado, Y., 42 Hart, O., 2 Ho, A., 57 Hofman‐Bang, P., 38, 39 J Jacobsen, K., 38, 39 Johansson, L., xvii, xviii Johnson, H.T., 49 K Kaplan, R.S., 49 Käpylä, J., 15 Klein, P.A., 15 Kluger, J., 54 Koller, D., 58 Kujansivu, P., 15 L Lejeune, J., 59 Lerro, A., 14, 15 Lev, B., 4, 49, 92 Lin, C.Y.-Y., xix, 4, 6, 14, 15, 32, 61, 85, 90, 92 Lönnqvist, A., 15 M Mačerinskas, J., 88 Mačerinskienė, I., 88 Malhotra, Y., 14

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 E. Ullberg et al., Intangible Asset Gap in Global Competitiveness, SpringerBriefs in Business, https://doi.org/10.1007/978-3-030-55666-2

99

Author Index

100 Malone, M.S., 14 Mullaney, T., 57 Musk, E., 54 N Nesterko, S., 57 Nordby, R., 38, 39 North, D.C., 54 O Öhrvall, S., xix Ostrom, E., 8

S Sachs, J., 59 Sahlin, N.-E., xvii Sanandaji, N., 50 Schiuma, G., 14, 15 Seaton, D., 57 Senor, D., 60 Shachar, S., 15 Singer, S., 60 Ståhle, P., 5, 7, 14, 15, 85 Ståhle, S., 7, 15, 85 Sullivan, P., 6, 7, 91 U Ullberg, E., xix, 54, 72

P Pasher, E., 15 Popper, K., xvii R Reich, J., 57 Rembe, A., 14 Roos, G., 14, 87, 88, 92

W Waldo, J., 57 Wallman, S.M.H., 49 Z Zhenghao, C., 58

Subject Index

B Benchmarking, 13, 17, 60 C Capability, 15, 85 China, xiv, 35, 38, 54, 60, 62–63 Competitiveness, vii, xii, xiv, xv, xvii, xix, 3–5, 9, 13–15, 17, 21, 29, 34, 35, 38, 41, 53, 57, 71 Contribution, xi, xvi, 5, 6, 14–17, 35, 41, 70 D Decline, xvi, xviii, xix, 23, 27, 34, 35 Digitalisation, vii, xiv, 4, 28, 29, 57–59, 71 E Economics, vii, xi, xiv, xvii, xix, 1, 4–6, 8, 13, 14, 19, 30, 34, 35, 37, 41, 50, 53–55, 57, 59, 61, 63, 72, 84, 89, 90 Edvinsson, Lin, Ståhle, Ståhle (ELSS), 6, 15, 72, 85, 86 Entrepreneurship, 15, 17, 27, 36, 49, 63, 80, 83, 86 Europe, xix, 37, 42, 43, 54, 55, 79, 93

H Human capital (HC), 2, 3, 8, 13–15, 17, 21, 36, 38, 44, 48, 79–82, 85–87 I Improvement, vii, xvii, 8, 9, 17, 20, 27, 43, 50, 59, 82 India, 54 Infrastructure, 15, 17, 35, 50, 61, 85, 87 Innovative capacity, 30 Intangible assets (IA), vii, viii, xi–xvi, xviii, xix, 1–6, 8–9, 14–17, 32, 37–51, 53–55, 57–60, 62–63, 65, 67–72, 79–82, 86–93 Intellectual assets, 16, 17, 21, 37, 80, 82, 85 Intellectual capital (IC), xi–xv, xviii, 4–8, 13–50, 62–63, 67, 68, 71, 72, 79–83, 85, 86, 89–93 national intellectual capital, xi, xii, xviii, xix, 2, 4–6, 13, 15–20, 24, 28, 30, 32, 35, 36, 50, 53, 61–62, 82, 86–89, 92 Intellectual property (IP), vii, xi, xii, 2, 4–6, 8, 59, 63, 72, 81–84, 91 intellectual property rights, 62–64, 72, 83, 91 Israel, 14, 15, 24, 26, 60

F Financial capital, 80, 85 G Government efficiency, 30, 31

M Market capital, 14–16, 21, 35, 48, 81, 82, 85–87 Measurement, 15, 39, 86

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 E. Ullberg et al., Intangible Asset Gap in Global Competitiveness, SpringerBriefs in Business, https://doi.org/10.1007/978-3-030-55666-2

101

Subject Index

102 N National wellbeing, 13 Nordic countries, xii, xix, 13, 14, 17–19, 21–25, 28, 30, 32, 35, 53, 87, 89 O Organisational capital, 85 P Patents, vii, xi, xii, 4, 6, 8, 15, 17, 32, 33, 35, 60, 63, 81–84, 86, 87 Performance, xiii, 13, 15, 17–19, 21, 22, 24, 26–28, 30, 32, 34–36, 39, 42, 43, 72, 80–82 Policy, vii, viii, xi, xiv–xvi, xix, 1–5, 8, 9, 14, 19, 34, 35, 50, 53–55, 59, 60, 68, 89 Process capital, 14, 15, 21, 28, 35, 81, 82, 85–87 Progress, 14, 19–21, 25, 28, 30, 35, 38, 49, 57, 59 R Reform, 50 Regression, 21, 23 Renewal capital, xii, xiii, 17, 18, 25, 26, 86

S Singapore, xii, xiii, 19, 24, 26, 35 Social, vii, xiv, xvii, 1, 8, 53–55, 57, 59, 63, 81, 84, 88, 90 Structural capital (SC), 7, 38, 44, 48, 79, 81, 88 Sustainable, xiv, 39, 59–62, 72 Switzerland, xii, xiii, xix, 15, 19, 24, 26, 35, 87 T Trade balance, 4 Trade in Ideas, viii, xvii, 8, 72 U Unicorns, xiv, 5, 60, 61 USA, 39, 54, 84, 89, 91, 92 V Value creation, xi, 5, 6, 16, 38, 39, 41, 49, 50, 70 Venture capital, 34