Solving the Value Conundrum of Knowledge and of Intellectual Capital in General

To measure is to know", yet it is paradoxical that where it concerns knowledge and creativity arguably the key drivers in today's 'new economy' - there is no consensus on how to measure, let alone value, these presumably valuable resources and activities. The realisation that a major part of a company's market value could not be explained by its financial or physical capital lay at the root of the intellectual capital movement since the early 1990's: Everyone "knows" that the combined intellectual assets (and liabilities) of an enterprise are increasingly critical in determining the health and therefore the value of the enterprise, if only because fewer and fewer enterprises rely on physical assets to do their business. Yet after almost two decades Intellectual Capital (IC) remains an elusive Shangri-La when it comes to providing generally accepted tools and techniques for identifying, measuring, reporting, and managing its value. This ultimately limits its usefulness for executive or managerial decision making. Using the case of knowledge markets, this paper exposes several shortcomings of the traditional transaction-based approaches that are typically used to determine the value of knowledge assets. It addresses specifically the limitations of ownership and appropriability, the significance of information asymmetry, and the need for authentication, all of which put downward pressure on the marketable value of knowledge. This goes to explain why knowledge markets cannot and should not merely mirror the dynamics of physical or financial markets. Key is to realise that the value of knowledge cannot be determined at the time of the exchange, and neither can its price! The act of sharing knowledge creates options on a continuum of future revenues. The value and price of knowledge should therefore be derived from whatever revenues it generates, as and when these are generated, rather than up front based on assumptions about future uses. Author proposes that knowledge markets be based on the 'bee-keeper model', an Open Source business model, separating the process of sharing knowledge from its commercial application, upon which its added value can ultimately be determined. By tracking shared knowledge all the way to where it leads to the generation of added value one can determine a claim on part of the related revenues to those who contributed to making them possible - by sharing their knowledge. These claims on part of future revenues can then also be traded as knowledge options.