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The Value Of Knowledge To The Organization

Guest post by: Dr. Fathi El-Nadi

Article Overview: Since knowledge is an intangible asset, it is difficult to assign a value to it. Its amorphous nature exacerbates this difficulty. Lew Platt, former CEO of Hewlett Packard, has acknowledged the dilemma: "If HP know what HP knows, we would be three times as profitable." Intellectual capital is collective knowledge, but who collects it and who disseminates it? Successful and competitive organizations are rich in knowledge, but whose knowledge is it and and who assigns value to it? Values assigned to knowledge may differ. For example, knowledge May have one value for the organization, another for shareholders, yet another for current and potential partners, and still one more for individuals within the organization.

The Value Of Knowledge To The Organization

From an organizational perspective, Platt's dilemma at HP highlights the difficulty of placing a value on corporate knowledge. For an organization, value, like beauty, is in the eye of the beholder. An organization's knowledge is valued as it is perceived, often from outside the organization. Recent dramatic stock market value is perceived, especially when the beholders are stockholders or potential stockholders.
In financial circles, analysis attempt to measure the stock market's valuation of intellectual capital - the present value of the future benefits to be obtained from intellectual capital (Lynn, 2000). In technology stocks, the vast gaps between book and market values highlight the value placed on intellectual capital, on knowledge possessed by the firm and, more tangentially, by employees of the firm. To date, generally accepted accounting principles generally accept no specific calculation to determine the value of knowledge. Knowledge is, however, valued in stock prices, a firm's market value if not its book value.
Globally, potential partners value knowledge in considering whether to engage in relationships. Hitt et al. (2000) studied partnerships between companies in developed and developing nations. Companies in developing countries seek partners willing to share expertise, while companies in developed countries seek partners with unique competencies and local market knowledge. The transfer of local market knowledge is directly dependent on organizational learning processes and the value attributed to such local market knowledge (Lord and Ranft, 2000) Partnerships are made with an eye to growing, developing and expanding organizational knowledge. The value of knowledge is critical to partners.
Individuals value knowledge, but general for personal, not corporate reasons. Corporate acquisitions, mergers, reorganizations, downsizing, rightsizing and restructuring have affected attitudes of staff. In the current economy, a permanent employee is an oxymoron (Greco, 1998). Consequently, individuals may view knowledge as a source of power, as leverage or as a guarantee of continued employment. In these respects, knowledge has value for the.
There are, then at least four perspectives from which the value of knowledge can be perceived: the organization; its shareholders; its current and potential partners; and individuals within the organization. Since knowledge is an intangible asset, it cannot be valued objectively nor precisely by any of these four, and this confounds the issue further.

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