Mouritsen Et Al 2001 Reading An IC Statement-Annotated

Journal of Intellectual Capital
Reading an intellectual capital statement: Describing and prescribing knowledge

management strategies
J. Mouritsen, M.R. Johansen, H.T. Larsen, P.N. Bukh,
Article information:
To cite this document:
J. Mouritsen, M.R. Johansen, H.T. Larsen, P.N. Bukh, (2001) "Reading an intellectual capital statement:
Describing and prescribing knowledge management strategies", Journal of Intellectual Capital, Vol. 2 Issue:
4, pp.359-383, https://doi.org/10.1108/EUM0000000006086
Permanent link to this document:
Downloaded by Iowa State University At 08:51 23 January 2019 (PT)
https://doi.org/10.1108/EUM0000000006086
Downloaded on: 23 January 2019, At: 08:51 (PT)
References: this document contains references to 31 other documents.
To copy this document: permissions@emeraldinsight.com
The fulltext of this document has been downloaded 2481 times since 2006*
Users who downloaded this article also downloaded:
(2000),"Intellectual capital literature review: Measurement, reporting and management", Journal of
Intellectual Capital, Vol. 1 Iss 2 pp. 155-176 <a href="https://doi.org/10.1108/14691930010348731">https://
doi.org/10.1108/14691930010348731</a>
(2001),"A knowledge-based theory of the firm to guide in strategy formulation", Journal of Intellectual
Capital, Vol. 2 Iss 4 pp. 344-358 <a href="https://doi.org/10.1108/14691930110409651">https://
doi.org/10.1108/14691930110409651</a>
Access to this document was granted through an Emerald subscription provided by emerald-srm:178063 []
For Authors
If you would like to write for this, or any other Emerald publication, then please use our Emerald for
Authors service information about how to choose which publication to write for and submission guidelines
are available for all. Please visit www.emeraldinsight.com/authors for more information.
About Emerald www.emeraldinsight.com
Emerald is a global publisher linking research and practice to the benefit of society. The company
manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as
providing an extensive range of online products and additional customer resources and services.
Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee
on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive
preservation.
*Related content and download information correct at time of download.

The current issue and full text archive of this journal is available at
http://www.emerald-library.com/ft
Reading an intellectual capital Reading an

intellectual
statement capital statement
Describing and prescribing knowledge

management strategies 359
J. Mouritsen and H.T. Larsen
Copenhagen Business School, Fredriksberg, Denmark, and
P.N. Bukh and M.R. Johansen
Aarhus School of Business, Aarhus, Denmark
Keywords Capital, Customers, Intellectual property, Accounting, Information, Management

Abstract This paper introduces a framework for analysing intellectual capital statements. It is
suggested that the three-way model of intellectual capital (human, organisations and structural)
can be developed in its descriptive and its prescriptive qualities. Another model is offered which
relate intellectual capital indicators to the firm's knowledge strategy. This IC accounting system
describes the transactions that allow the firm's knowledge strategy to be implemented and it
prescribes an agenda from which it is possible to monitor the effects around intellectual resources,
to qualify and upgrade them and to survey the portfolio of intellectual resources. An example of
Systematic Software Engineering's two intellectual capital statements from 1999 and 2000 is
used to illustrate how intellectual capital statements may be read from this perspective.
Introduction
Published intellectual capital statements are rare documents. Even if Skandia
and Dow Chemicals published intellectual capital statements in the 1990s, there
has been more talk about the possible benefits of such documents than of their
actual content. Several authors (e.g. Bontis et al., 1999; Erhvervs
UdviklingsraÊdet, 1997; Guthrie and Petty, 2000; Harvey and Lusch, 1999;
Johanson et al., 1998, 1999; Larsen et al., 1999, Mouritsen, 1998, 2000; Petty and
Guthrie, 2000; SaÂnchez et al., 2000) discuss new forms of reporting systems,
which include ``non-financial'' indicators. Rarely, however, were these reporting
systems specifically developed as intellectual capital statements. Typically,
they were ``new'' forms of reporting systems generally. There is still a lack of
research about firms that set out to develop intellectual capital statements.
Therefore, there is little analysis of situations where intellectual capital
statements are seen as answers, just as there is little evidence about the
question that makes an intellectual capital statement an interesting answer.
In Guthrie and Petty's (2000) study of Australian practices, the three-way
breakdown of intellectual capital into human capital, organisational capital and
customer capital (Edvinsson, 1997; Edvinsson and Malone, 1997; Roos et al.,
1997; Stewart, 1997; Sullivan, 1998) is used to ``measure'' the content of new
forms of reporting. Using this classification, Guthrie and Petty (2000) suggest
that the indicators used in the statements spread across the three forms of Journal of Intellectual Capital,
Vol. 2 No. 4, 2001, pp. 359-383.
intellectual capital as 30 per cent human capital, 30 per cent organisational # MCB University Press, 1469-1930
JIC capital (internal structure) and 40 per cent customer capital (external structure).
2,4 It is possible to count the number of indicators, and this creates insight into the
structure of intellectual capital indicators, but it has limited indication of the
structure of intellectual capital.
It is also possible to aggregate them. Roos et al. (1997, p. 83ff) develop an
IC-index that creates an indicator for each of the three forms of intellectual
360 capital and an aggregate one, which then can be monitored across time.
Weights have to be assigned to the actual value of each indicator and then the
weighed IC index can be produced. This procedure has merit as it integrates
indicators, but it is an open question how weights are to be found.
It is even possible to simulate and present the indicators in complex graphs.
Edvinsson et al. (2000) show how an IC-landscape can describe the intellectual
capital components in 3-D representations, illustrate the effects of simulations
and use them as forecast information. This procedure allows communication of

the structure of the intellectual capital but it may be near to impossible to find
the model that allows predictions to be made about the states of the indicators.
Whether the indicators are weighed or not, and whether they are simulated
and visualised or not, however, the three-way model neither describes nor
prescribes the development of intellectual resources well since it tends to draw
the indicators away from the context they represent. There is more to an
intellectual capital statement than the indicators. Reading an intellectual
capital is different from reading a financial statement, because the intellectual
capital statement does not have the institutions that make certain readings
conventional, as in the case of the financial statement. The financial statement
is an institutionalised reading of, for example, profitability, liquidity and
solidity. Through history, capital markets have increasingly refined this
reading taking into regard industry-specific influence, firm-specific variance
and the effect of the general economic climate. This is located in strong
institutional contexts.
The intellectual capital statement does not have such institutions. This is
why the indicators in the intellectual capital statement typically cannot be read
as directly and `èasily'' as the ones in financial statements. The logic of reading
the indicators can therefore not be `òutside'' the document but it has to be made
part of it. Roos et al. (1997) say that the measurement of the intellectual capital
and the management of knowledge and information go hand in hand:
`Ìntellectual capital is concerned with how better to manage and measure
knowledge and other intangibles in the company'' (Roos et al., 1997, pp. 6-7). If
measurement does not make management ± or intervention ± possible there is
no need for it. Therefore, the measurement system needed to probe into
intellectual capital has to be part of an idea of intervention around managing
knowledge (Allee, 1997; Baxter and Chua, 1999; Bukh et al., 2001; Birkitt, 1995;
Guthrie, 2001; Larsen et al., 1999; Roos and Roos, 1997; Ross, 1998; Sveiby,
1997; Sullivan, 1998). In effect, an intellectual capital statement has to be about
a firm's knowledge management activities. How is this possible? How can this
be read from an intellectual capital statement?
To answer these questions, this paper uses Systematic Software Reading an
Engineering Ltd's two intellectual capital statements to illustrate how intellectual
intellectual capital statements may be analysed[1]. It analyses their capital statement
composition, textual content and indicators and thereby it illustrates that and
how an intellectual capital statement is a report on the firm's knowledge
management activities. The textual parts of the statement present the firm's
knowledge management strategy ± often as a story about the effects on users 361
that derive from the firm's knowledge resources ± and the associated set of
management challenges needed to implement the knowledge management
strategy. The indicators of an intellectual capital statement are there to monitor
the implementation of the management challenges. The indicators do not
measure and explain the difference between market and book value and they
do not compute a financial value of the firm[2]. Rather, the indicators are there
to check on the degree to which the firm's knowledge management strategy has
been made real. An IC accounting system may help monitoring the effects of
knowledge resources, the qualification and development of available
knowledge resources, and the development of the portfolio knowledge
resources.
The paper explains and illustrates these points, and it is organised as
follows. The next section discusses models of intellectual capital. Briefly, it
attempts to show why and how it may be possible to criticise the three-way
split in human, organisational and customer capital. This section goes on to
argue how it is possible to develop stronger analytical dimension which allows
some form of prescription. Then a section presents Systematic's intellectual
capital statements. This section discusses how knowledge management can be
put on such a form that it may be related to indicators. The last section
provides conclusions.
The three-way intellectual capital model

The idea of intellectual capital is explained by Edvinsson and Malone (1998,
p. 21, translation added) as follows:
Perhaps, the role of intellectual capital is easiest explained by using a metaphor. If we
imagine a firm as a living organism; for example, a tree, one can say that organisational
plans, annual and quarterly reports, firm brochures, and other documents are the trunk,
branches and leaves. The wise investor will examine the tree whether he can harvest ripe
fruit. But to assume that we have now seen the whole tree because we have seen the visible is
a grave mistake. At least half the tree is below surface in the roots. And while the taste of the
fruits and the colour of the leaves make a good presentation of the present health of the tree, it
is much more effective to look at what goes on in the roots if one wants to form an opinion
about the health of the tree for the coming years. There may be rot below the surface, which
as time goes may kill the tree that looks healthy presently. This is what makes intellectual
capital ± investigation of roots of a firm's value, measurement of the dynamic factors, which
are found below the visible surface of a firm's buildings and products ± so important.
This elegant presentation shows intellectual capital in action. It tells a story

about the relationship between the past and the future, and it dramatises the
need to look after the roots. Intellectual capital is thus partly a story of
JIC interlinked activities that happen all over the tree at any moment in time. To
2,4 understand a firm's intellectual resources one has to look beyond the present
fruits and towards the ability to produce fruits in the future.
The three-way split into human capital, organisational (structural) capital
and customer capital is thought to be able to report beyond the present.
Stewart's (1997, p. 86) proposition is mainstream and he defines human capital
362 as that which thinks: ``[m]oney talks, but it does not think; machines perform,
often better than any human being can, but do not invent . . . [The] primary
purpose of human capital is innovation ± whether of new products and
services, or of improving in business processes''. Structural capital is
``knowledge that doesn't go home at night . . . [I]t belongs to the organization as
a whole. It can be reproduced and shared . . . technologies, inventions, data,
publications, . . . [and] strategy and culture, structures and systems,
organisational routines and procedures'' (Stewart, 1997, pp. 108-9). Like human
capital, the firm cannot own customer capital. Yet, it is crucial because it is ``the
value of its franchise, its ongoing relationships with the people or organisations
to which it sells . . . [like] market share, customer retention and defection rates,
and per customer profitability'' (Stewart, 1997, p. 143). Edvinsson's and
Sveiby's models are presented in Figure 1. There are significant overlaps.
Stewart's definition is adopted by most authors on intellectual capital even if
there are small variations (see Figure 1). However, it has two problems: one of
description and one of prescription!
Problem 1: description ± the three-way model is functional

The three-way model separates the three kinds of knowledge resources. It
purifies the distinction between them and claims that the three categories exist
as autonomous functional entities. Humans think; and they go home.
Organisational/structural capital does not go home and is probably more
reliable. It does not have agency and does not resist ± not even being sold.
Organisational capital is therefore a key element in understanding the firm as a
predictable entity. It is routinised and procedurised. Customer capital is ± like
human capital ± not reliable as the customer base can flee away. It is valuable,
however, and therefore customers have to be stabilised by providing valuable
relationships. Customers have to be bought and then they will be loyal.
The three elements of intellectual capital fundamentally exist in separation
because they have different relations to property rights. People cannot be
owned; machines can. Customers cannot be owned, technology and routines
can. However, the three categories are not only related, they are also integral to
each other. People work through technology; customers get services from
people, information technology circulates both customers and employees (Bukh
et al., 2001). Therefore the three kinds of resources are complements. They are
part of a network of things and people that co-produce the effects of the whole
network. Even when interaction between the three factors is argued to be
important as Roos et al. (1997) do, in their IC index they are presented
individually. The descriptive properties of the three-way model miss
Reading an
intellectual
capital statement
363
Figure 1.
Edvinsson's and
Sveiby's models of
intellectual capital
JIC complementary between the elements that cohere not because they help
2,4 mobilise the knowledge strategy of the firm and they are interesting only to the
degree that they can monitor its implementation. The intellectual capital
statement translates a set of knowledge management challenges into a bundle
of interrelated indicators that traverse the three elements of intellectual capital.
Where does this leave indicators? It leaves them at a level with the indicators
364 in a financial statement. Financial statements do not principally ``measure'' the
economy; they are literally expressions of an organisation of receipts.
Analogously, indicators in an intellectual capital statement may be about
transactions made visible through the ``receipt'' that defines an indicator, which
are often statements about employees, about customer-relations, about
processes, or about technology (e.g. Bukh et al., 2001, Mouritsen et al.,
forthcoming). This is not the three-way model because the ``receipt perspective''
is not functional ± statements on employees may not (only) say something

about employees but (also) about technology if it is about training in IT.
Statements on employee-satisfaction may not (only) be indicative of the firm's
human resource program but (also) of interesting customer-relations. To turn
from an idea of functional classification to one of classifying transactions
changes the interpretation of an indicator. The descriptive qualities of the
intellectual capital elements change from the three-way model's emphasis on
functional qualities towards an alternative that ``merely'' identifies the ``receipts''
that make up a number. This ``merely'' classifies indicators, which then can be
attached to the implementation of management challenges relevant to the firm's
strategy rather than fill out the gap between a market value and a book value.
Problem 2: prescription ± the three-way model has no management agenda

The three-way model does not prescribe any effect of the indicators. Comparing
the three-way model with a conventional financial statement, it has objects akin
to revenues, costs, assets and liabilities but it does not have anything similar to
the analytical potentiality found in profitability, liquidity and solidity, which
are three evaluative and potentially prescriptive readings of a financial
statement. The three-way model omits issues and problems that face a reader
of an intellectual capital statement.
Prescriptions are associated with possible courses of action. Comparing
again to Edvinsson and Malone's tree, actions seem endless, but a few types
appear generic. One is the portfolio of resources: how many branches, how tall
to be, how large a root system? These are portfolio issues, which in a firm
would be analogous to putting together a group of employees, of customers and
of technologies to answer the question: ``how do we look?''. Another set of issues
qualify ± or develop ± the tree: how to develop the branch, how to make the
leaves big, how to make the tree colourful? Such questions would in a business
context concern how to develop human resources, customer relations, process
quality and productivity to answer the question: ``what do we do to our
resources?''. And a third set of issues pertains to the size of the tree's fruits, to
its taste and to its volume. For a firm this would be the monitoring of results in
a variety of dimensions that pertain to employees, customers, processes and Reading an
technologies answering the question: ``what good effects are associated to our intellectual
resources?''. capital statement
These prescriptions are ``managerial''. They are concerned to mobilise
indicators vis-aÁ-vis certain activities that have a place in and around an
intellectual capital statement.
365
A revised model: an IC accounting system
On the basis of the previous discussion, a revised model may be formulated and
presented as in Figure 2. Compared with the three-way model, it provides new
possibilities of description and enhanced possibilities of prescription.
This IC accounting system[3] has a vertical dimension for knowledge
resources and competencies, and a horizontal dimension for three possible
types of management activities that can be performed on knowledge resources

and competencies. As illustrated in Figure 2, the vertical part consists of four
objects for intervention, employees, customers, processes and technology,
while the horizontal part consists of three types of prescriptions.
The indicators in the ``resources'' column addresses the question: ``what is the
(right) portfolio of resources?''. Resource indicators are about the firm's ``stock''
of relatively stable objects such as `à customer'', `àn employee'', `à computer'',
and `à process''. Such indicators show how large, how diversified, how complex
and how related resources are. The indicators in the ``qualifying activities''
column is the answer to the question: ``do managers undertake qualifying
activities?''. Activity indicators describe activities undertaken to `ùpgrade'',
``develop'' or `ìmprove'' the resources. They show what is done in the firm, for
Figure 2.
An IC accounting
system
JIC example, to change the resource through objects such as training, investments
2,4 in process improvement, and activities undertaken to attract customers.
Finally, the `èffects'' column addresses the question: ``does what we do work?''.
Effect indicators illustrate overall consequences of the combination of the
decisions about resources and about qualification activities. Such effects can be
put together by any combination of the elements of the model illustrated in
366 Figure 2. It is not a simple input-output model. Effects are network effects and
can be explained by multiple constellations of indicators. Effects are related to
the combinations involving resources and activities. It is a strategy to point this
relation out and act on it.
On the other dimension, statements on employees may be indicated by
formal qualifications (``resources''), investments in on-the-job training and
education (``qualifying activities'') and employee satisfaction (`èffects'').
Likewise, statements on customers may be indicated, for example, as number

of large customers (``resources''), marketing efforts per customer (``qualifying
activities''), and customer satisfaction (`èffects''). Statements on processes may
be indicated by resources per process (``resources''), quality activities
(``qualifying activities'') and throughput and waiting time (`èffects''). Finally,
statements on technology may be indicated by PCs per employee (``resources''),
IT investments (``qualifying activities') and IT certificates (`èffects'').
This IC accounting system can classify all indicators we have seen[4]. It is
noteworthy that indicators sometimes advocated in the literature and among
practitioners are not visible here. Innovation, flexibility, learning, and
customer-orientation are not here. This is because they convey strategy rather
than transactions. For example, `ìnnovation'' may be indicated in some firms
by the number of new patents (effects, processes), other firms present revenues
from new products (effects, customers), and yet others from aggregate number
of patents (resources, processes) or number of PhDs (resources, employees).
Innovation is not an indicator but a strategy that can be laid out in different
ways and through various combinations of indicators. As suggested by the
examples shown, innovation can be made relevant to the firm in various ways.
It does not exist per se and it is therefore not a category in an accounting
system of intellectual capital[5].
As an accounting system, this IC accounting system has certain common
traits with conventional financial accounting systems (see Table I).
Financial accounting system IC accounting system
Description: Transactions are classified in Transactions are classified in employees,

resource object cost, revenues, assets or customers, processes, or technologies
Table I.
liabilities
Similarities between
the financial Prescription: Analysis can be made of Analysis can be made of management
accounting system and mode of profitability, liquidity, actions concerning portfolio decisions,
the IC accounting intervention solvency and risk qualifying activities, monitoring and
system evaluation of effects
Using the IC accounting system presented, it is possible to ``test'' the firm's Reading an
intellectual capital statement. It can be used to analyse whether the espoused intellectual
strategy pursued by the firm is in accordance with its strategy of managing capital statement
knowledge resources. This can be illustrated with an example using Systematic
Software Engineering Ltd's two intellectual capital statements from May 1999
and May 2000.
367
Systematic Software Engineering Ltd's intellectual capital
statements
Systematic Software Engineering Ltd is a Danish software house that develops
and sells technical system solutions, products and support primarily to
ministries of defence but also increasingly to industry, as well as transport and
service companies (see and download the intellectual capital statements from
www.systematic.dk).
Systematic was chosen for the analysis of this paper because managers say
that it experiences several benefits from its intellectual capital statement both
internal and external ones, and the firm is genuinely interested in improving its
management of intellectual resources. Indeed, it could not separate between its
intellectual capital project and its knowledge management project. These
claims will be illustrated later in the paper.
Method
We studied Systematic's work to develop its intellectual capital statement over
three years. The object of the research was the future intellectual capital
statement, which was in the making at the start of the research. We studied the
statement as it was unfolding, and we were able to follow some of the
prescriptions offered by network theory, which suggests that it is interesting to
study things while they are being made (Latour, 1987). According to such a
view, ``things'' are always constituted in networks of relations, and therefore
they cannot possess an essence. ``Things'' ± such as prospective or actual
intellectual capital statements ± are `ìn the hands of people; each of these people
may act in many different ways, letting the token drop, or modifying it, or
deflecting it, or betraying it, or adding to it, or appropriating it'' (Latour, 1986,
p. 267). ``Things'' do not have an immutable essence, which ``just'' has to be
drawn out. In contrast, according to the network view, `ìt is in principle
impossible to define the list of properties that would be typical of life in society
although in practice it is possible to do so'' (Latour, 1986, p. 272). To study
Systematic's intellectual capital statement is to look at how it was made
interesting, how it was developed, how it was used, and how it was re-used and
re-formed. In this sense, the intellectual capital statement was a fragile
resource, which was made strong during the course of the analysis. This story
is obviously a complex one, but ± as will be clearer ± for the indicators in the
intellectual capital statement to be ``stable'' and `ìnteresting'' they had to be
attached to an issue. This issue was knowledge management in Systematic,
and therefore the management of knowledge and the intellectual capital could
JIC not be separated. They were part of the same network of arguments, artefacts,
2,4 decisions and effects.
The following five questions guided our analyses throughout the three years:
(1) Why do the firms want to measure intellectual capital?
(2) Who are involved in the project?
368 (3) How does the firm work with intellectual capital?
(4) What is intellectual capital made to be in the specific firm?
(5) What potential effects is the reporting of intellectual capital expected to
have?
To summarise Systematic's situation in this respect the following answers can
be made (Table II).
In 1999, 33 per cent was human capital, 25 per cent customer capital and 42
per cent organisational/structural capital, and in 2000, 40 per cent was human
capital, 24 per cent customer capital and 33 per cent organisational/structural
The firm Systematic Software Engineering Ltd is a Danish software house

that develops and sells technical system solutions, products and
support primarily to ministries of defence but also increasingly to
industry, as well as transport and service companies
The motivation to Internal reason: the firm wanted to make the firm's knowledge
develop an intellectual resources and key competency areas visible and to monitor
capital statement management's efforts to develop these. Also, management wanted
to establish a new basis for deciding about the firm's future
External reason: management firm wanted to present the firm to
customer and employees, and to co-operating firms and other
interests in an `ìnteresting'' way
Organisation of the The project was managed by the COO and one person. The CEO
intellectual capital and the CFO were sparring-partners
project
Effects of the Internal: it has created initiatives to share knowledge including a
intellectual capital mapping of competencies and a heightened attention to the
statement/project development of competencies, mapping of processes and
introducing knowledge agents and mentors. Partly, a system of
project management has been established that introduces a series
of ``balanced'' points of measurement in project-reporting systems
External: systematic has become a ``name'' among research
communities, the press and local authorities. The intellectual
capital statement has made it possible to attract new specialised
IT employees and get network relations to a series of firms
interested in competency development
Distribution of Domain Year 1999 Year 2000
Table II. indicators Employees 16 18
Summary of the Customers 12 11
systematic software Processes 12 10
engineering case Technology 8 5
capital. This presents a story of Systematic in a form of transition between Reading an
human and organisational capital. Another interpretation is possible, however. intellectual
When the IC accounting system developed previously is applied, a whole new capital statement
interpretation is possible. But first, what is the context of the intellectual capital
statement?
Systematic software engineering 369

Systematic was founded in 1985, with its first contract being a support and
maintenance job for the Danish Navy, but soon it obtained other defence
contracts and in the beginning of 1990, the first non-defence contract was won.
At the time of publication of Systematic's first intellectual capital statement in
the spring of 1999, it had 130 employees and annual sales of DKK 80 million. It
has subsidiaries in the UK and USA, but the intellectual capital statement only
concerns the Danish part of Systematic. It is the stated aim of Systematic to

change its core business areas from primarily being a supplier of defence
systems to increasingly becoming a supplier also to civilian markets. In recent
years there has in fact been a steady increase in the proportion of civil contracts
with Electronic Data Interchange, electronic trade and security systems being
the core business areas.
The layout of the intellectual capital statement. Systematic's intellectual
capital statements are 16 and 19 pages long, of which the first five to seven
pages are an introduction to and a description of the company including its
mission, vision and values, and the last couple of pages are an excerpt from its
financial statement. The intellectual capital statement is largely structured
according to the model shown in Figure 3, which is inspired by the business
excellence model.
The vision, values, objectives and strategies of Systematic are presented
first. Then the report goes on with efforts, and it ends with results. It is
Figure 3.
Systematic's model to
structure the intellectual
capital statement
JIC structured as `àn economic engine'' where the inputs are the visions, missions
2,4 and strategies, the transformation are statements on people, processes and
customers, and results are financial. There is thus, even if the statement stands
out as a report on the complexities of organisational life, a relatively simple
model of the virtues of this complexity as it appears to translate relatively
unambiguously into financial results.
370 The intellectual capital statements as documents. The first steps towards
developing an intellectual capital statement were taken in mid-1997. It was seen
as an alternative to the traditional annual report, and very symbolically the
annual financial statement is presented as a supplement to the intellectual
capital statement. The intellectual capital statement is a colourful and an
expressive form of communication. Systematic's second intellectual capital
statement pictures employees showing how they work and what they like in
life cut across the text. It has several bonmots such as ``People learn as long as
they live; firms live as long as they learn''; ``Knowledge is the only asset that is
increased by sharing''; `Ìf only Systematic knew what it knows''; and
``Knowledge is power, but the power must be shared''. The statement
illuminates through numbers as well as corresponding text and illustrations
some aspects of customer-relations, employee development and customer- and
employee-satisfaction, the effectiveness of processes, and certain forms of
innovation in areas of product development and process improvement. It also
has a set of quite extraordinary indicators ± the Coca-Cola index, the carrot
index, the cycle index, and index for the number of customers visiting Solveig's
lunch buffet (these have been much talked about in the press). These show
humour and suggest not only an ironic distance to the traditional accounting
rigour, but they also demonstrate commitment to playfulness. The text is full of
statements on preferred working methods, procedures and objectives, whose
implementation is documented by an array of indicators. It also illustrates
Systematic's competency development methods and knowledge management
activities.
In this way, the statement is a collage of stories about the life of Systematic;
a set of numbers showing some aspects of the development of this life; and a
whole array of pictures and humorous indicators. Together these make the
presentation informal and ironic compared with the financial accounting
framework, even if the whole publication ends with the formal financial
statement.
Using the intellectual capital statement. The purpose of the intellectual
capital statement `ìs to disclose the knowledge resources of the company and to
explain management's efforts to develop them'' (Systematic, 2000, p. 6).
Initially, Systematic's intellectual capital statement project was ``very internally
focussed, and knowledge management was the big issue'', as it was suggested
in an interview. The aim was to prepare an internal intellectual capital
statement as a direct support for the knowledge management initiatives taken
by Systematic. During the course of the project, however, its focus shifted more
towards the external intellectual capital statement, as it was seen to be of
interest to customers, potential employees and other companies. It was an Reading an
active form of communication directed towards recruiting employees, building intellectual
stronger relationships to existing employees and customers and strengthening capital statement
attention towards the firm's main strategic challenges. After all, it was
suggested, if this were the effect of communication, then it was not ``mere
communication'', but a system for developing the resource base of the firm, and
thus allow it to prosper for the future. 371
After the publication of the first intellectual capital statement in May 1999,
Systematic's management actively used it in their presentations of the
company. It was frequently discussed with customers and business partners,
and Systematic's management was surprised by the ability of the intellectual
capital statement to present the firm in professional and coherent terms. It was
said to help develop new contacts to both potential employees and to
organisations and companies with whom they did not historically have any
relations.
Suddenly, the externally published intellectual capital statement was an
important part of the firm's `ìnternal'' knowledge management activities. As
the intellectual capital statement reported on the implementation of knowledge
management activities it allowed insight into the aspirations and practices of
developing the firm's resources. This insight was deemed by internal and
external parties to be interesting in their understanding of the firm and indeed
in decisions about their relations to the firm.
This relation between knowledge management and the intellectual capital
statement is singled out in both of Systematic's intellectual capital statements
and given special emphasis in the second one where knowledge management is
treated as a separate theme. Increasingly, employees found it hard ``to
distinguish between what has been called knowledge management and
knowledge measurement'', as it was expressed in Systematic. It was
increasingly seen as an influence on the firm's understanding of itself, as it ±
even if it was an `èxternal document'' ± started to occupy a place in the firm's
internal communication. It was suggested in an interview that the usefulness of
the statement changed over time:
. . . you get used to preparing an intellectual capital statement, it will also to some extent
become a management model. It can be said to ``set the agenda'', and it thus has the potential
for becoming a management model.
Over time, if mobilised, the intellectual capital statement constructs and refines
organisational agendas. When mobilised they influence the domains it was
supposed merely to describe. A pointed distinction between managing and
describing things does not exist.
Analysing Systematic's intellectual capital statement

Table III presents the indicators used in Systematic's intellectual capital
statement. As for any accounting statement, it is possible to discuss how the
indicators should be placed in the IC accounting system.
JIC Category/
2,4 form Effects Qualifying activities Resources
Employees Absence due to sickness Training days Number of staff

(days/employee) (employee/ Average number of
Total employee year) full-time staff
372 satisfaction Training investment Staff distribution on
Per cent of employees (employee/year) different tasks
perceiving Systematic Size of project teams Average age of staff
as a satisfactory/very Team member including per cent
satisfactory workplace participation in under 40
different project Number of software
phases engineers vs number
of staff employed in
administrative functions
Intake vs reduction
of software
engineers
Professional software
experience ± total
number of years
Professional software
experience ± average
per software
engineer
Per cent of employees
holding PhD or
Masters degrees
Cola-index (per
employee)
Customers Total customer Customers visiting Distribution of turnover

satisfaction Solvejg's lunch buffet between projects and
Duration of existing Participation in self-developed
customer research projects products
relationships Five largest project
New strategic customers customers in per cent
during the year of project turnover
Per cent of customers Five largest licence sales
who would recommend in per cent of product
Systematic turnover
Export's share of
turnover
Number of licences sold
during the year
Active project customers
during the year
Active project customers
Table III. during the year
Systematic's indicators (defence vs non-defence)
organised by the IC
accounting system (continued)
Category/ Reading an
form Effects Qualifying activities Resources intellectual
capital statement
Processes BOOTSTRAP process Consumption of
assessment internal hours on
Software development software process
performance (five improvement 373
items) Investment in product
Score in European development
benchmark survey Investment in process
of software companies improvement
Own products share Total investments in
of turnover innovation activities
Average response (including percentage
time for calls to of group turnover)

switchboard
Total telephone service
index (share of calls
completed in first
call)
Number of platforms
IRIS is compatible
with
Employee satisfaction
with ``quality and
efficiency of processes''
Customer satisfaction
with ``quality of
services and products''
Pizza-index (per
employee)
Quality certificates
(ISO 9001, AQAP)
Technology Employee satisfaction Investment in computer PCs/workstations per

with `òffice premises'' equipment employee
Number of hits on Web Investment in premises Number of servers in
site per day and office equipment network
Bicycle index (per cent of m2 office space
employees using a
bicycle as their
primary means of
transportation to work)
Table III.
Systematic's intellectual capital statement appears to emphasise indicators on

employees and processes. For employees, resource and effect indicators are
used, while processes are indicated primarily via effects and partly by
qualifying activities. The selected indicators appear to focus on effects of
processes and on attracting employees, particularly software engineers.
Recruitment and the development of procedures that enable knowledge sharing
JIC are interrelated. Systematic's intellectual capital focuses on developing stable
2,4 relationships between employees, technology and customers.
Systematic's knowledge management challenges. Systematic's challenge is to
create a ``knowledgeable'' and ``capable'' organisation that integrates highly
systematised processes and highly qualified employees in order to provide
quality products. Commenting on the first intellectual capital statement,
374 Systematic's management explained as follows in an interview:
We solve a problem for the customer and deliver a piece of software. In principle, we are a
consulting firm that offers knowledge and expertise more than a product-house that delivers
a standard solution. My picture of Systematic is that we deliver unique solutions based on the
people and processes we have . . . Our TQM project is closely related to our intellectual capital
project. It is about processes and we want to include more measures about our projects' on
time delivery in the statement.
Here, it is suggested that organisational processes be central to knowledge

management activities. These activities are far from esoteric concerns for
epistemology and abstract knowledge often seen in parts of the philosophical
debate on knowledge. They are particular and specific ``problems'' that arise out
of issues concerning people and project management techniques. A closer look
at Systematic's indicators, using the IC accounting system presented earlier,
makes it possible to understand this a bit more clearly. Table IV illustrates the
development of a selected number of indicators over three years.
Table IV shows that Systematic has expanded its human resources in
software development, just as it invests increasingly in activities, which
develop them. Also, employee satisfaction increases. Thus, in terms of
measures in the employee category, a certain attention to expanding the
resource bases is in place; and concerns to enhance their value is in place via
qualifying activities. The customer category illustrates a slowly changing
revenue base giving more space to civil ± rather than defence-related ±
revenues even if the number of continuing projects only increases by small
steps. As a resource, customers are found in new areas of business segments.
From the process category it appears that attention is on qualifying
activities via heavy investments in product development and a slightly smaller
investment in process technology, and the hours invested in development work
increase steadily. It also appears that improvement in the quality of the
processes is emerging, as witnessed by the BOOTSTRAP measurements.
So, Systematic is a firm that has developed its resource base in the employee
category, it is partly transforming its revenues bases making it less dependent
on one industry, and it invests heavily in the development of processes and
employees. These indicators suggest that the development of project
management systems, quality, and on-time delivery are parameters of the
attempt to improve processes and incorporate employees. For Systematic,
knowledge resources are enhanced by actions that make the firm attractive to
prospective employees, and that allows the whole system of developing,
producing and maintaining complex software solutions for certain users to be
achievable. To be able to do this, however, managers also have to develop the
Effects Improvement activities Resources
Employees Satisfaction: culture 97 98 99 Education: 97 98 99 Number of software 97 98 99

3.9 3.8 4.0 days/person 3.6 5.2 7.8 people 69 90 103
Manager 3.3 3.4 3.6 Cost/person (000 Kr) 11 10 20 Employment 98 124 137
Tasks 3.6 3.7 3.6 Masters and PhD (%) 66 69
Top management 3.4 3.5 3.6
Customers Satisfactiona 97 98 99 97 98 99 Projects 97 98 99
± 4.1 ± 23 26 28
% customers to 88 % civil revenues 23 39 52
recommend SSEa (projects)
Value for moneya 3.9 No. of licences sold (000) 2.4 12.0 1.6
Customer durability:
0-3 years 13 15 16
4-6 years 5 6 5
7-13 years 5 5 7
Processes BOOTSTRAP 97 98 99 Hours process 97 98 99 97 98 99
evaluation 2 2.3 2.5 improvement (000) 1.2 3.2 4.3
Customer satisfaction 3.9 Product development 3.3 6.7 7.5
on qualitya (mill. Kr)
Telephone service 92 95 Process development 0.5 1.3 1.7
index (%) (mill. Kr)
Development costs as 6 10 10
% of revenues
Technology Employee satisfaction 97 98 99 97 98 99 PC/employee 97 98 99
with physical work 4.1 3.7 3.1 1.3 1.4 1.8
environment
No. of servers 13 19 32
a
Note: Customer satisfaction is only measured biannually
Systematic's indicators
A selection of
Table IV.
intellectual
capital statement
Reading an
375
JIC insights that make user requirements visible. This includes training employees
2,4 in the ways of customers' work and allows industry-specific knowledge to be
more apparent in software development.
In effect, the knowledge management challenge thus mobilised, involves
four different kinds of actions to be performed. One is to recruit and retain
employees, particularly as the firm is growing rapidly along with the need for
376 people to develop software solutions. Systematic's second intellectual capital
statement is clear about this:
We . . . put strong emphasis on attracting, developing and retaining the best software
engineers in the market. We must provide a stimulating and challenging workplace with
active investment in the professional and personal development of our employees
(Systematic, 2000, p. 12).
An integrated part of the firm's knowledge management practice is thus to look

for the best and brightest and develop their professional and personal
competencies. This is confirmed by the intellectual capital statement (see Table
II) showing that development of human resources is taking place, and that
employees are attracted to the firm.
Another element of the knowledge management challenge is to make these
people part of an integrated system that delivers quality software within time
and budget limits. Quality is important here because the software solutions are
used in critical areas such as defence communication, where errors can have
tremendous consequences even to the point of human lives, and in
communication within financial service institutions where security,
confidentiality and precision are critical issues. The intellectual capital
statement is clear about the importance of bringing the various resources of the
firm together in order to gain a collective strength vis-aÁ-vis the customer:
All software is developed in project groups that work according to structured methods . . .
The customer is involved throughout the development process. Quality is assured through
consistent use of our development model, which focuses on project management,
management of requirements, configuration management and close dialogue with our
customer (Systematic, 2000, pp. 6-7).
Such attention to improving the delivery of software as an integrated project

from inception to final use is indicated in the intellectual capital statement from
investments in qualifying activities for processes. Also, at the same time, the
effects ± the BOOTSTRAP measure ± tend to improve, this is likely, not futile.
For processes to work, individual human motivation has to be aligned with
the requirements of integrated production methods. A third related knowledge
management challenge is the development of the employees' precise knowledge
of the users' situation. Part of this is investments in training/employee
development and part of it is on-the-job training that help software engineers
understand more of the users' business. The second intellectual capital
statement says:
Experience shows that delays are typically due to failure to clarify specific user requirements
and to acknowledge that the customer himself is a significant sub-supplier in the
development process . . . It is our ambition that the success of projects should not only be Reading an
measured by our ability to delivery on time and to the price and quality agreed. Ideally, both
parties will also have gained knowledge, not only to the benefit of the development and intellectual
operational use of the system, but also with respect to future projects (Systematic, 2000, capital statement
p. 11A).
This part of the knowledge management challenge looks at the development of

customer-relations. Their durability may be part of the development of insights 377
that help Systematic to anticipate user needs and perhaps even suggest to the
customers when new software and perhaps whole systems are appropriate.
From the intellectual capital statement it appears that the durability of
customer relations is stable over time (see Table II). There is a relatively limited
set of customers but more than half has been `àctive'' for more than four years.
This durability is said to be part of the linkages between customers and
employees:
Systematic is a ``house of knowledge'' with young employees. This provides a creative and
informal environment, which is appealing to many customers. Customer meetings are often
held in the house thus creating relations between the customer and our project people. Last
year we had 776 guests participating in Solveig's lunch buffet (Systematic, 2000, p. 11).
The number of participants in Solveig's lunch buffet is one of Systematic's

surprising indicators. It helps to show customers' willingness to visit the firm.
This set of four knowledge management challenges can be read out of
Systematic's intellectual capital statements. This reading is a proposition about
how the firm can and should develop its knowledge resources. Readers may
disagree that this is a relevant strategy for managing knowledge resources ±
this is an evaluation of the relevance of the sets of management challenges
mobilised in the firm. Relevance of the knowledge management activities
depends on the reader.
The knowledge management strategy. How could the relevance of
Systematic's knowledge management activities be evaluated? Reading the
intellectual capital statements, a story of the relevance of knowledge resources
gradually emerges. This story is about critical, reliable, errorless and large
software solutions. Considering the users ± e.g. defence departments, pilots and
soldiers ± lives are at stake if the technology does not work. The knowledge
management strategy attends to the ability of the firm to supply reliable
solutions in time through organising the firm around the user's situation. Here,
knowledge is an organisational effect; it is a routine that allows the bits of
software insights, project planning skills, insights into the customers' situation
and ability to integrate new employees to be part of one organisational system.
The first intellectual capital statement makes the point in the following way:
It is our objective to reach a certified maturity level by year 2000 . . . High process maturity
entails precision in delivery, predictability in quality, etc. At the same time we reduce our
dependence on individuals, as knowledge and experience gathered are embedded in the
organisation through recognised methodologies and techniques, guidelines, templates, best
practices, etc. (Systematic, 1999, p. 10).
JIC Figure 4 helps illustrate what Systematic's intellectual capital statement is
2,4 about. It shows the knowledge management strategy ± or the story that makes
knowledge management relevant. It also shows the specific challenges
developed to realise this knowledge management strategy, and it shows the
indicators used to survey whether the set of management challenges is actually
put in place.
378 The four knowledge management challenges are interdependent. If there
were no new employees, the attention to strengthening the structuring effects
of project management skills would not be as important. If users and customers
were stable there would be no need to develop customer relationships, and
there would ± in turn ± be no need to develop organisational skills in quality
and project management. Likewise, development of organisational skills and
collective procedures in the form of, for example, new kinds of project
management systems also requires employee development. Therefore, the four

management challenges are all part of a connected movement towards new
organisational skills oriented towards facilitating the production and
implementation of large, integrated, customer-oriented software solutions.
It may be that a reader would disagree that Systematic's strategy is sensible.
The intellectual capital statement provides the reader with a story of the firm's
knowledge strategy, a set of management challenges and a set of indictors. It
does not prove that these are correct but the analysis of these three elements
may allow a reader to form an opinion; not always in accordance with the
aspirations sought by the firm. However, when Systematic suggest that
attraction of employees is a priority and may document this by numbers in the
form of portfolio indicators; that it attempts to improve project management
and suggests that an increasing number of managers have been training to this
effect documented by activity indicators; that it attempts to train employees,
which has been documented by activity indicators; and that it attempts to
create better customer relationships documented by the number of people
having done training to understand the industry, then it is possible that the
knowledge strategy is not merely ``words''; it may also be ``fact'' in some form.
Intellectual capital statements in action

The analysis of Systematic's two intellectual capital statements suggests how
it may be possible to account for a knowledge management strategy. Roos et al.
(1997) did point out that knowledge management strategies are integrally part
of intellectual capital and, in the case of Systematic, illustrates intellectual
capital statements report on the efforts made to define and execute the firm's
knowledge management strategy. For the purpose of the intellectual capital
statement, a firm's knowledge management strategy is about its value
proposition to a user. It is a strategy about the effects of the firm's efforts to
make products and services useful. Concentrating on usefulness ± or value-to-
the-user ± intellectual capital statements show the activities that the firm ``has''
to put in place to enhance its knowledge resources to improve ``value'' for a user
or a customer.
Reading an
intellectual
capital statement
379
Figure 4.
Interpreting
Systematic's intellectual
capital statement
JIC Related to the knowledge strategy, the knowledge management challenges are
2,4 the set of actions to be performed by management to implement it. The steps to
make the strategy real are pointed out and monitored via indicators. The steps
are defined across `èmployee capital'', ``customer capital'' and `òrganisation
capital'' categories. Systematic does not only emphasise one of the categories; it
takes them all on and explains how they are not only interrelated but more part
380 of a totality that cannot be broken down. It is a total network where each of the
elements perform only together with the other elements. This linkage is a
strategy that shows how the knowledge resources work in concert, what they
are supposed to achieve and how they create value to users.
The intellectual capital statement is thus a mix of strategy, management and
reporting. These cannot be separated because the intellectual capital statement
needs a justification for the indicators, and the indicators have to report on
something. The indicators are there to make evaluation of the implementation

of the firm's knowledge strategy possible, and the knowledge strategy is there
to show how the intellectual capital statement is intended to be read. This does
not mean that the intellectual capital statement is necessarily correct. However,
it may allow readers to form their own opinions about the value of the firm.
Both negative and positive readings may come out of an intellectual capital
statement.
Conclusion
This paper develops an IC accounting system for describing and prescribing
intellectual capital. It extends the three-way model of human, organisational
and customer capital in two ways. First, it considers the complex
complementarities that exist between statements on employees, customers,
processes and technologies. Second, it provides an analytical ability to monitor
effects, survey qualifying activities and to describe portfolios of resources. The
indicators help to describe the transactions that take place in firms in order to
enhance and mobilise their knowledge management strategies. They also help
to prescribe types of intervention and allow the analysis of the intellectual
capital statements to be oriented towards actions that can be executed.
Through a reading of Systematic's intellectual capital statements, the
application of this IC accounting system has been illustrated. Its intellectual
capital statement is a heterogeneous collage of words, pictures, bonmots,
numbers, and visions. Systematic's work to develop and use an intellectual
capital statement shows linkages between the `èxternal'' intellectual capital
statement and the `ìnternal'' knowledge management activities. Not only is the
substance of the intellectual capital statement activities of knowledge
management, but the intellectual capital statement is also an active part of
knowledge management, because it creates new networks and ``catches'' the
interest of valued resources such as prospective employees and customers. The
`èxternal'' is thus directly `ìnternal''.
The indicators of Systematic's intellectual capital statement support a story
of a firm committed to creating an organisational system of coherent
knowledge resources. It shows that Systematic's efforts are primarily in the Reading an
area of recruitment of software engineers (portfolios of employees) and intellectual
development of organisational procedures (qualification of processes), which capital statement
integrates employees, customers and products. Reading the intellectual capital
statement from a three-way model, we would learn that most of Systematic's
indicators are organisational capital in 1999 and human capital in 2000.
Extending this story, using the IC accounting system, the complementarities 381
between humans and organisational procedures are made clearer. The
analytical categories of the proposed IC accounting system help a more
complex story to be told compared with the one that can be told via the three-
way classification alone.
Notes
1. Systematic Softwaree Engineering Ltd. is one of 17 firms that participated in a large

project over three years to develop a Guideline for Intellectual Capital Statements
organised by the Danish Agency for Trade and Industry. Each of the 17 firms agreed to
publish at least two intellectual capital statements and in collaboration with each other,
they set out to create ``relevant'' intellectual capital statements. The authors of this paper
followed and analysed the process (Bukh et al., 2001; Mouritsen et al., forthcoming). See
also www.efs.dk/icaccounts for more information about the project's results.
2. Edvinsson (1997), Roos et al. (1997), Stewart (1997) and Sveiby (1997) all suggest that the
value of intellectual resources is the market-to-book value. They never show how this
number can be computed, however, and if it were the case that such a number could be
built, it would not be very interesting. If the value of the firm were already defined, there
would be no extra value from computing it again. Intellectual capital statements are of
value only if they allow new insights to be produced that would change the value of the
firm. In effect, the intellectual capital statement is not there to `èxplain'' the market-to-book
ratio. It is there to change it. There may be other and more interesting uses of the maket-to-
book argument in relation to understanding financial markets.
3. The arguments for this model have been presented logically and analytically in the text. In
addition, it also has empirical support from the larger project involving 17 firms. Through
interviews the dimensions of the model came out as respondents problematised their uses
of the intellectual capital statement. The management agenda arose out of the discussion of
how to make implications from the information contained in intellectual capital statements.
4. These categories are the ones we see from the intellectual capital reports being published
by the Danish companies, but note here, that the research is carried out primarily around
service and consulting firms meaning that other categories, e.g. suppliers, might be
important for other kind of companies, e.g. manufacturing ones.
5. Classifying some numbers may be more difficult than others. Therefore, there is a need for
rules-of-thumb ± or accounting standards. As an example, involvement by customers and
employees in training programmes can be seen both as improving the qualifications of the
customers and the qualifications of the employees ± and it could also be an activity to
upgrade the firm's image. Another example could be employees that were trained in
process optimisation. This could be seen as a qualifying act in relation to the employees
but also in relation to the process dimension. In these cases it will be necessary to apply
rules-of-thumb to classify the indicator. Should it be placed according to that domain that
is mentioned first in the definition of the indicator? Or should it be classified according to
the most `ìmportant'' part of the indicator? And then, what will the most important part
be?
JIC References
2,4 Allee, V. (1997), The Knowledge Evolution: Expanding Organizational Intelligence, Butterworth-
Heinemann, Boston, MA.
Baxter, J. and Chua, W.F. (1999), ``Forum on knowledge management: now and the future'',
Australian Accounting Review, Vol. 9 No. 3, pp. 3-14.
Birkitt, W.F. (1995), ``Management accounting and knowledge management'', Management
382 Accounting, Vol. 75 No. 5, pp. 44-8.
Bontis, N., Dragonetti, N.C., Jacobsen, K. and Roos, G. (1999), ``The knowledge toolbox: a review
of the tools available to measure and manage intangible resources'', European
Management Journal, Vol. 17 No. 4, pp. 391-402.
Bukh, P.N.D., Larsen, H.T. and Mouritsen, J. (2001), ``Constructing intellectual capital
statements'', Scandinavian Journal of Management, Vol. 17 No. 1, pp. 87-108.
Edvinsson, L. (1997), ``Developing intellectual capital at Skandia'', Long Range Planning, Vol. 30
No. 3, pp. 266-373.

Edvinsson, L. and Malone, M.S. (1997) , Intellectual Capital, Piatkus, London.
Edvinsson, L. and Malone, M.S. (1998), Videnkapital, Bùrsen, Copenhagen.
Edvinsson, L., Kitts, B. and Bedling, T. (2000), ``The next generation of IC measurement ± the
digital IC-landscape'', Journal of Intellectual Capital, Vol. 1 No. 3, pp. 263-73.
Erhvervs UdviklingsraÊdet (1997), Intellectual Capital Accounts ± Reporting and Managing
Intellectual Capital, Agency for Trade and Industry, Copenhagen (http://www.efs.dk/
publikationer/rapporter/engvidenregn/)
Guthrie, J. (2001), ``The management, measurement and reporting of intellectual capital'', Journal
of Intellectual Capital, Vol. 2 No. 1, pp. 27-41.
Guthrie, J. and Petty, R. (2000), `Ìntellectual capital: Australian annual reporting practices'',
Journal of Intellectual Capital, Vol. 1 No. 3, pp. 241-51.
Harvey, M.G. and Lusch, R.F. (1999), ``Balancing the intellectual capital books: intangible
liabilities'', European Management Journal, Vol. 17 No. 1, pp. 85-92.
Johanson, U., MaÊrtensson, M. and Skoog, M. (1999), ``Measuring to understand intangible
performance drivers'', working paper, School of Business, Stockholm University.,
Stockholm.
Johanson, U., EkloÈv, M., Holmgren, M. and MaÊrtensson, M. (1998), ``Human resource costing and
accounting versus the balanced scorecard: a literature survey of experiences with the
concept'', working paper, School of Business, Stockholm University, Stockholm.
Larsen, H T., Mouritsen, J. and Bukh, P.N.D. (1999), `Ìntellectual capital statements and
knowledge management: measuring, reporting and acting'', Australian Accounting Review,
Vol. 9 No. 3, pp. 15-26.
Latour, B. (1986), ``The power of associations'', in Law, J. (Ed.), Power, Action and Belief ± A New
Sociology of Knowledge, Routledge and Kegan Paul, London.
Latour, B. (1987), Science in Action, Open University, Milton Keynes.
Mouritsen, J. (1998), ``Driving growth: economic value added versus intellectual capital'',
Management Accounting Research, Vol. 9 No. 4, pp. 461-83.
Mouritsen, J. (2000), ``Valuing expressive organisations: intellectual capital and the visualisation
of value creation'', in Schultz, M., Hatch, M.J. and Larsen, M.H. (Eds), The Expressive
Organization, Oxford University Press, Oxford.
Mouritsen, J., Larsen, H.T. and Bukh, P.N.D. (forthcoming), `Ìntellectual capital and the `capable
firm': narrating, visualising and numbering for managing knowledge'', Accounting,
Organizations and Society.
Petty, R. and Guthrie, J. (2000), `Ìntellectual capital literature review'', Journal of Intellectual Reading an
Capital, Vol. 1 No 2, pp. 155-76.
Roos, G. and Roos, J. (1997), ``Measuring your company's intellectual performance'', Long Range
intellectual
Planning, Vol. 30 No. 3, pp. 413-26. capital statement
Roos, G., Ross, G., Edvinsson, L. and Dragonetti, N.C. (1997), Intellectual Capital: Navigating in
the New Business Landscape, Macmillan Business, Houndmills.
Ross, J. (1998), `Èxploring the concept of intellectual capital (IC)'', Long Range Planning, Vol. 31 383
No. 1, pp. 150-3.
SaÂnchez, P., Chaminade, C. and Olea, M. (2000), ``Management of intangibles. An attempt to build
a theory'', Journal of Intellectual Capital, Vol. 1 No. 4, pp. 312-27.
Stewart, T.A. (1997), Intellectual Capital, Nicholas Brealey Publishing, London.
Sullivan, P.H. (Ed.) (1998), Profiting from Intellectual Capital: Extracting Value from Innovation,
Wiley, London.
Sveiby, K.E. (1997), The New Organizational Wealth: Managing and Measuring Knowledge-based
Assets, Berrett-Koehler, San Francisco, CA.
Systematic (1999), `Ìntellectual capital statement'', available at www.systematic.dk
Systematic (2000), `Ìntellectual capital statement'', available at www.systematic.dk
This article has been cited by:
1. SmritiNeha, Neha Smriti, DasNiladri, Niladri Das. 2018. The impact of intellectual capital on firm
performance: a study of Indian firms listed in COSPI. Journal of Intellectual Capital 19:5, 935-964.
[Abstract] [Full Text] [PDF]
2. Francesco Badia, Grazia Dicuonzo, Saverio Petruzzelli, Vittorio Dell’Atti. 2018. Integrated reporting
in action: mobilizing intellectual capital to improve management and governance practices. Journal of
Management and Governance 7. . [Crossref]
3. CricelliLivio, Livio Cricelli, GrecoMarco, Marco Greco, GrimaldiMichele, Michele Grimaldi, Llanes
DueñasLeidy Paola, Leidy Paola Llanes Dueñas. 2018. Intellectual capital and university performance in
emerging countries. Journal of Intellectual Capital 19:1, 71-95. [Abstract] [Full Text] [PDF]
4. SecundoGiustina, Giustina Secundo, MassaroMaurizio, Maurizio Massaro, DumayJohn, John Dumay,
BagnoliCarlo, Carlo Bagnoli. 2018. Intellectual capital management in the fourth stage of IC research.
Journal of Intellectual Capital 19:1, 157-177. [Abstract] [Full Text] [PDF]
5. Mohamed Ragab, Amr Arisha. An Academic Perspective: Effective Knowledge Assessment 153-164.
[Crossref]
6. Guenther Schuh, Ramon Kreutzer, Marc Patzwald. Assessing the Value of Data: An Approach to Evaluate
the Technology Driven Benefits of Smart Product Data 1-10. [Crossref]
7. Amir Zakery, Abbas Afrazeh. 2017. Analysing intellectual capital management and growth based on
dynamic modelling. Knowledge Management Research & Practice 15:1, 101-113. [Crossref]
8. LinChin-Shien, Chin-Shien Lin, PengTzu-Ju Ann, Tzu-Ju Ann Peng, ChangRuei-Yuan, Ruei-Yuan
Chang, DangVan Thac, Van Thac Dang. 2016. Dynamics of external fit and internal fit: case of electronics
industry. Chinese Management Studies 10:1, 184-203. [Abstract] [Full Text] [PDF]
9. Giuseppe Marzo, Elena Scarpino. 2016. Exploring intellectual capital management in SMEs: an in-depth
Italian case study. Journal of Intellectual Capital 17:1, 27-51. [Abstract] [Full Text] [PDF]
10. Vincenzo Del Giudice, Pietro Evangelista, Pierfrancesco De Paola, Fabiana Forte. Knowledge Management
and Intellectual Capital in the Logistics Service Industry 376-387. [Crossref]
11. Anna Pistoni, Lucrezia Songini. New Trends and Directions in CSD: The Integrated Reporting 81-105.
[Citation] [Full Text] [PDF] [PDF]
12. Claes Wohlin, Darja Šmite, Nils Brede Moe. 2015. A general theory of software engineering: Balancing
human, social and organizational capitals. Journal of Systems and Software 109, 229-242. [Crossref]
13. Christian Nielsen, Robin Roslender. 2015. Enhancing financial reporting: The contribution of business
models. The British Accounting Review 47:3, 262-274. [Crossref]
14. Leonardo Fernando Cruz Basso, Juliana Albuquerquer Saliba de Oliveira, Herbert Kimura, Erica
Sumoyama Braune. 2015. The impact of intangibles on value creation: Comparative analysis of the Gu and
Lev methodology for the United States software and hardware sector. Investigaciones Europeas de Dirección
y Economía de la Empresa 21:2, 73-83. [Crossref]
15. Emidia Vagnoni, Chiara Oppi. 2015. Investigating factors of intellectual capital to enhance achievement
of strategic goals in a university hospital setting. Journal of Intellectual Capital 16:2, 331-363. [Abstract]
[Full Text] [PDF]
16. Robin Roslender, Abigail Marks, Joanna Stevenson. 2015. Damned if you do, damned if you don’t:
Conflicting perspectives on the virtues of accounting for people. Critical Perspectives on Accounting 27,
43-55. [Crossref]
17. Merridee L Bujaki. 2015. Visualizing the Rideau Canal through early budget estimates, 1823–1824.
Accounting History 20:1, 43-62. [Crossref]
18. Mohammad Rahmani Karchegani, Saudah Sofian, Salmiah Mohd Amin, Majid Jamshidy. 2014.
Intellectual Capital and Holism Philosophy. Journal of Applied Sciences 14:22, 3131-3141. [Crossref]
19. Julia A. Smith, Renzo Cordina. 2014. The role of accounting in high-technology investments. The British
Accounting Review 46:3, 309-322. [Crossref]
20. Merryl Whyte, Suzanne Zyngier. 2014. Applied Intellectual Capital Management. Journal of Intellectual
Capital 15:2, 227-248. [Abstract] [Full Text] [PDF]
21. Dumay John. 2014. 15 years of the Journal of Intellectual Capital and counting. Journal of Intellectual
22. Lucia Bellora, Thomas W. Guenther. 2013. Drivers of innovation capital disclosure in intellectual capital
statements: Evidence from Europe. The British Accounting Review 45:4, 255-270. [Crossref]
23. Maria Serena Chiucchi. 2013. Measuring and reporting intellectual capital. Journal of Intellectual Capital
14:3, 395-413. [Abstract] [Full Text] [PDF]

24. Daniel Guevara, Ahmed Bounfour. 2013. Monitoring intellectual capital: a case study of a large company
during the recent economic crisis. Knowledge Management Research & Practice 11:2, 196-207. [Crossref]
25. Hwan‐Yann Su, Shih‐Chieh Fang, Chaur‐Shiuh Young. 2013. Influences of relationship transparency
from intellectual capital reporting on supply chain partnerships with suppliers: a field experiment. Supply
Chain Management: An International Journal 18:2, 178-193. [Abstract] [Full Text] [PDF]
26. Gunnar Rimmel, Johan Dergård, Kristina Jonäll. 2012. Human resources disclosure in Danish intellectual
capital statements. Journal of Human Resource Costing & Accounting 16:2, 112-141. [Abstract] [Full Text]
[PDF]
27. Norhayati Mat Husin, Keith Hooper, Karin Olesen. 2012. Analysis of intellectual capital disclosure – an
illustrative example. Journal of Intellectual Capital 13:2, 196-220. [Abstract] [Full Text] [PDF]
28. Michela Cordazzo, Philip G.M.C. Vergauwen. 2012. Intellectual capital disclosure in the UK biotechnology
IPO prospectuses. Journal of Human Resource Costing & Accounting 16:1, 4-19. [Abstract] [Full Text]
[PDF]
29. Adam Steen, Denice Welch, Darcy McCormack. 2011. Conflicting conceptualizations of human resource
accounting. Journal of Human Resource Costing & Accounting 15:4, 299-312. [Abstract] [Full Text] [PDF]
30. Hwan‐Yann Su, Shih‐Chieh Fang, Chaur‐Shiuh Young. 2011. Relationship transparency for partnership
enhancement: an intellectual capital perspective. Journal of Business & Industrial Marketing 26:6, 456-468.
31. Marco Giuliani, Stefano Marasca. 2011. Construction and valuation of intellectual capital: a case study.
32. Carla Curado, Nick Bontis. 2011. Parallels in knowledge cycles. Computers in Human Behavior 27:4,
1438-1444. [Crossref]
33. Robin Roslender. Accounting for Human Resources Revisited: Insights from the Intellectual Capital Field
85-110. [Crossref]
34. Jan Carrell. An Epistemology of Intellectual Capital and its Transition to a Practical Application 17-43.
[Crossref]
35. Silvana Revellino, Jan Mouritsen. 2009. The Multiplicity of Controls and the Making of Innovation.
European Accounting Review 18:2, 341-369. [Crossref]
36. Paulo Lopes Henriques, Carla Curado. 2009. Pushing the boundaries on mentoring: Can mentoring be a
knowledge tool?. Journal of Business Economics and Management 10:1, 85-97. [Crossref]
37. Ljiljana Kontic, Sladjana Cabrilo. 2009. A strategic model for measuring intellectual capital in Serbian
industrial enterprises. Ekonomski anali 54:183, 89-117. [Crossref]
38. Hong Pew Tan, David Plowman, Phil Hancock. 2008. The evolving research on intellectual capital. Journal
of Intellectual Capital 9:4, 585-608. [Abstract] [Full Text] [PDF]
39. Blaise M. Sonnier. 2008. Intellectual capital disclosure: high‐tech versus traditional sector companies.
40. Fabio Donato. 2008. Managing IC by antennae: evidence from cultural organizations. Journal of Intellectual
41. Irfaan Khota, Leon Pretorius. Intellectual property scorecard: Strategically capitalising on value created by
innovation and R&D 584-592. [Crossref]
42. Carla Curado. 2008. Perceptions of knowledge management and intellectual capital in the banking industry.
Journal of Knowledge Management 12:3, 141-155. [Abstract] [Full Text] [PDF]

43. Suresh Cuganesan, Christina Boedker, James Guthrie. 2007. Enrolling discourse consumers to affect
material intellectual capital practice. Accounting, Auditing & Accountability Journal 20:6, 883-911. [Abstract]
[Full Text] [PDF]
44. J‐L.W. Mitchell van der Zahn, Inderpal Singh, Joshua Heniro. 2007. Is there an association between
intellectual capital disclosure, underpricing and long‐run performance?. Journal of Human Resource Costing
& Accounting 11:3, 178-213. [Abstract] [Full Text] [PDF]
45. Alina Lee, John Neilson, Greg Tower, J‐L.W. Mitchell Van der Zahn. 2007. Is communicating intellectual
capital information via the internet viable?. Journal of Human Resource Costing & Accounting 11:1, 53-78.
46. Robert H. Ashton. Value-Creation Models for Value-Based Management: Review, Analysis, and Research
Directions 1-62. [Abstract] [Full Text] [PDF] [PDF]
47. Bino Catasús, Jan‐Erik Gröjer. 2006. Indicators: on visualizing, classifying and dramatizing. Journal of
Intellectual Capital 7:2, 187-203. [Abstract] [Full Text] [PDF]
48. Christian Nielsen, Per Nikolaj Bukh, Jan Mouritsen, Mette Rosenkrands Johansen, Peter Gormsen. 2006.
Intellectual capital statements on their way to the stock exchange. Journal of Intellectual Capital 7:2,
221-240. [Abstract] [Full Text] [PDF]
49. Carla Curado. 2006. Organisational learning and organisational design. The Learning Organization 13:1,
25-48. [Abstract] [Full Text] [PDF]
50. Erkki K. Laitinen. 2006. Financial statement data in assessing the future potential of a technology firm:
The case of Nokia. International Review of Financial Analysis 15:3, 256-286. [Crossref]
51. Eggert Claessen. 2005. Strategic use of IC reporting in small and medium‐sized IT companies. Journal of
52. Suresh Cuganesan. 2005. Intellectual capital‐in‐action and value creation. Journal of Intellectual Capital
53. Jan Mouritsen, Heine Thorsgaard Larsen. 2005. The 2nd wave of knowledge management: The
management control of knowledge resources through intellectual capital information. Management
Accounting Research 16:3, 371-394. [Crossref]
54. JAN MOURITSEN, PER NIKOLAJ BUKH, HEINE KAASGAARD BANG. 2005. Understanding
Intellectual Capital in an Innovative Medium-sized Firm: The Case Of Maxon Telecom. Australian
Accounting Review 15:36, 30-39. [Crossref]
55. J. Mouritsen, H. Thorsgaard Larsen, P.N. Bukh. 2005. Dealing with the knowledge economy: intellectual
capital versus balanced scorecard. Journal of Intellectual Capital 6:1, 8-27. [Abstract] [Full Text] [PDF]
56. Robin Roslender, Robin Fincham. 2004. Intellectual Capital: Who Counts, Controls?. Accounting and the
Public Interest 4:1, 1-23. [Crossref]
57. Jan Mouritsen. 2004. Measuring and intervening: how do we theorise intellectual capital management?.
58. J. Guthrie, R. Petty, K. Yongvanich, F. Ricceri. 2004. Using content analysis as a research method to inquire
into intellectual capital reporting. Journal of Intellectual Capital 5:2, 282-293. [Abstract] [Full Text] [PDF]
59. Robin Roslender, Robin Fincham. 2004. Intellectual capital accounting in the UK. Accounting, Auditing &
Accountability Journal 17:2, 178-209. [Abstract] [Full Text] [PDF]
60. Jan Mouritsen, Per Nikolaj Bukh, Bernard Marr. 2004. Reporting on intellectual capital: why, what and
how?. Measuring Business Excellence 8:1, 46-54. [Abstract] [Full Text] [PDF]
61. . References 143-145. [Crossref]
62. Per Nikolaj Bukh, Ulf Johanson. 2003. Research and knowledge interaction. Journal of Intellectual Capital
63. James Guthrie, Ulf Johanson, P.N. Bukh, P. Sánchez. 2003. Intangibles and the transparent enterprise:
new strands of knowledge. Journal of Intellectual Capital 4:4, 429-440. [Abstract] [Full Text] [PDF]
64. Robin Fincham, Robin Roslender. 2003. Intellectual capital accounting as management fashion: a review
and critique. European Accounting Review 12:4, 781-795. [Crossref]
65. Patricia Ordóñez de Pablos. 2003. Intellectual capital reporting in Spain: a comparative view. Journal of
66. Jan Mouritsen. 2003. Intellectual capital and the capital market: the circulability of intellectual capital.
Accounting, Auditing & Accountability Journal 16:1, 18-30. [Abstract] [Full Text] [PDF]
67. Per Nikolaj Bukh. 2003. The relevance of intellectual capital disclosure: a paradox?. Accounting, Auditing
& Accountability Journal 16:1, 49-56. [Abstract] [Full Text] [PDF]
68. J. Mouritsen, P.N. Bukh, H.T. Larsen, M.R. Johansen. 2002. Developing and managing knowledge
through intellectual capital statements. Journal of Intellectual Capital 3:1, 10-29. [Abstract] [Full Text]
[PDF]
69. James Guthrie, Richard Petty, Ulf Johanson. 2001. Sunrise in the knowledge economy. Accounting,
Auditing & Accountability Journal 14:4, 365-384. [Abstract] [Full Text] [PDF]
70. J. Mouritsen, H.T. Larsen, P.N.D. Bukh. 2001. Intellectual capital and the ‘capable firm’: narrating,
visualising and numbering for managing knowledge. Accounting, Organizations and Society 26:7-8, 735-762.
[Crossref]
71. A.M. Fairchild. Knowledge management metrics via a balanced scorecard methodology 3173-3180.
[Crossref]

Mouritsen Et Al 2001 Reading An IC Statement-Annotated

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Mouritsen Et Al 2001 Reading An IC Statement-Annotated

Uploaded by

Copyright:

Available Formats

Journal of Intellectual Capital

Reading an intellectual capital statement: Describing and prescribing knowledge

*Related content and download information correct at time of download.

Reading an intellectual capital Reading an

Describing and prescribing knowledge

Keywords Capital, Customers, Intellectual property, Accounting, Information, Management

and use them as forecast information. This procedure allows communication of

The three-way intellectual capital model

This elegant presentation shows intellectual capital in action. It tells a story

Problem 1: description ± the three-way model is functional

is not functional ± statements on employees may not (only) say something

Problem 2: prescription ± the three-way model has no management agenda

types of management activities that can be performed on knowledge resources

Likewise, statements on customers may be indicated, for example, as number

Financial accounting system IC accounting system

Description: Transactions are classified in Transactions are classified in employees,

The firm Systematic Software Engineering Ltd is a Danish software house

Systematic software engineering 369

concerns the Danish part of Systematic. It is the stated aim of Systematic to

Analysing Systematic's intellectual capital statement

Employees Absence due to sickness Training days Number of staff

Customers Total customer Customers visiting Distribution of turnover

time for calls to of group turnover)

Technology Employee satisfaction Investment in computer PCs/workstations per

Systematic's intellectual capital statement appears to emphasise indicators on

Here, it is suggested that organisational processes be central to knowledge

Effects Improvement activities Resources

Employees Satisfaction: culture 97 98 99 Education: 97 98 99 Number of software 97 98 99

An integrated part of the firm's knowledge management practice is thus to look

Such attention to improving the delivery of software as an integrated project

This part of the knowledge management challenge looks at the development of

The number of participants in Solveig's lunch buffet is one of Systematic's

management systems also requires employee development. Therefore, the four

Intellectual capital statements in action

something. The indicators are there to make evaluation of the implementation

1. Systematic Softwaree Engineering Ltd. is one of 17 firms that participated in a large

No. 3, pp. 266-373.

14:3, 395-413. [Abstract] [Full Text] [PDF]

Journal of Knowledge Management 12:3, 141-155. [Abstract] [Full Text] [PDF]

You might also like