Knowledge capital

Knowledge capital is the intangible value of an organisation made up of its knowledge, relationships, learned techniques, procedures, and innovations. In other words, knowledge capital is the full body of knowledge an organisation possesses.

Having employees with skills and access to knowledge capital puts a company at a comparative advantage to its competitors. Knowledge capital, sometimes referred to as intellectual capital, is considered an intangible asset.

Rather than relying on the physical effort of its machines and other equipment, a company's knowledge capital is dependent on the skills and talents of its workers. This is what makes it an intangible asset with intangible value, or assets that we cannot touch whose value we cannot measure.

Knowledge capital is anything of value that results from people's experience, skills, knowledge, and learning within an organization. This capital has immeasurable value and cannot be quantified. As such, it gives a company a competitive advantage over its rivals.

Knowledge capital is unlike the physical factors of production—land, labour, and capital—in that it is based on skills employees share with each other in order to improve efficiencies rather than physical items.

Organisations with high knowledge capital may be more profitable or productive compared to organisations with lower knowledge capital. Businesses develop knowledge capital by encouraging employees to share information through white papers, seminars, and person-to-person communication. When this capital is pooled together and shared, the results can be worth a great deal.

Knowledge capital is important because it reduces the odds that a company will have to reinvent the wheel each time a particular process is undertaken. This is because its employees have access to documents detailing the necessary steps, along with access to personnel who have undertaken similar activities. Even though it may not be a physical asset, knowledge capital still requires a lot of investment.

For businesses to be successful, they must effectively and efficiently harness and exploit the potential of their knowledge capital.

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