Mind Value Processes

Mind Value Processes

DOI: 10.4018/978-1-4666-7369-4.ch004
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Abstract

Capitalism today faces a daunting challenge since much of the value produced in today's world is not a direct consequence of investment dollars or working capital but produced by skills, knowledge, and relational associativity. Although the so-called “intangibles” that produce value today are referred to as “assets,” they are accounted for as expenses and are usually not managed as “capital” at all. Leading businesses are attempting to understand how Intellectual Capital produces value, and it marks the beginning of a shift from traditional ways of looking at value creation, but the phrase itself embodies legacy thinking and moves in the wrong direction. It is necessary, therefore, to return to the epistemological basis of the concept of value. This chapter attempts to explain the relational basis of value and its transformation from knowing, as the organizing process of what is behind being human.
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Introduction

In modern capitalism, knowledge has become a necessary factor, as much or more than labor or capital. To be more exact, it is an intermediary factor. Knowledge goes into production, governing practices, processes and resources. In the productive circuit of industrial capitalism, work generates knowledge, and knowledge, in turn, creates value. Thus, capital, to accrue value, not only must subsume this living labor but also the knowledge it generates and puts into circuit. There reside precisely the difficulties of this subsuming, which, to put it short, fails to reduce knowledge to capital. In summary, within the process of value creation, knowledge is a complex mediator since its valuation does not respond to the categories of tangibles. Moreover, they differ widely from the liberal or Marxist thought in their respective theories of value, to such a degree that there are as many definitions of knowledge associated to value (intellectual capital) as there are researchers dedicated to develop this topic. Kaufmann and Schneider (2004) identify 37 definitions of intellectual capital, and if we add to this other renowned researchers such as Brooking (1997), Andriessen (2003), Viedma (2001), Meritum Project (2001), Club Intelect (1998), Allee (2000) or Saint Onge (1996), we come up with more than 45 different definitions of intellectual capital. It follows that there is a vast literature aimed at the value generation process starting from a relatively new concept.

The question is, therefore, what is the cause of the explosion of such varied methods? Why there are so many methods used to explain how an organization generates its wealth through the knowledge it possesses? Why do IC reports such as those from Skandia show different indicators from year to year? If companies, to survive, must be unique (Andriessen, 2001), should there be as many methods to identify intellectual capital as companies that wish to manage it? For us it is clear that the answer to this last question is no, but then, how do we explain such diversity? In our view, the explanation to this question is the lack of analysis of the epistemological roots of knowledge and the concept of value, in agreement with assessments of Kaufmann and Schneider (2004): “a comparison of the theoretical roots of the publications shows that several different attempts were made to help in dealing with intangibles, but no broad theoretical basis exists that offers grounded explanations for the management of intangibles” (p.380). Note that Goran and Johan Roos (1997) make an attempt to develop an epistemology of intellectual capital from the classification of cognitive science posed by Varela (1998), but only manages to establish that if individuals who make up the organization behave according to some of the cognitive distinctions (cognitive, connectionist and autopoietic), the organizations must also behave this way, then the most effective management of knowledge should also point in the same direction.

According to Rullani (2004) “neither the theory of value, of the Marxist tradition, nor the currently dominant liberal tradition can account for the transformation of knowledge into value”. In fact, knowledge certainly has a value in use ‒for users, for society‒ but does not have a cost reference value that can be employed as a yardstick to determine the exchange value, functioning either as marginal cost (neoclassical theory) or reproduction cost (Marxist theory). Indeed, when applying this duality a curious situation arises, since, in contrast to most tangible goods, knowledge has economic value ‒exchange value‒ only when used. The fundamental problem underlying duality of value, its use and exchange, is that both are built on the properties of the object and not the relationship. For this reason, the design of value must be built on the notion of process and relational structure.

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