Intellectual Property and Intellectual Capital as a Basis of Competitiveness of the Growing Technology Company - Term Paper Example

Intellectual Property and Intellectual Capital as Basis of Competitiveness of the Growing Technology Company Name Institution Date Table of Contents Table of Contents 2 1.0 Introduction 3 1.1 Intellectual Property 3 1.2 Intellectual Capital 3 1.3 Intellectual property and Intellectual Capital in firms 4 1.4 Nature of competition in technology firms 5 2.0 How intellectual property and intellectual capital have influenced competition in the technology company 7 3.0 Review Analysis 8 4.0 Conclusion 10 5.0 References 11 1.0 Introduction Technology has become part of our day to day routine from our homes and work places. Every day poses a new challenge to the inventors and innovators of technology. As each day passes there is an increasing need for better, easier and affordable technology. However, technology and creativity is a result of the works of the mind. It originated from an idea just like many business ideas and innovations. Therefore, the ability of the mind is much bigger than one can envision as it will be illustrated in this paper, giving rise to the importance of treasuring these ideas as we incorporate them to the successes of our businesses. The main terminologies we shall use include; intellectual property and intellectual capital. This paper will focus on how intellectual property and intellectual capital have grown to become a competitive factor in businesses. 1.1 Intellectual Property Intellectual property is described as a non-physical property which is a creation of the mind. Intellectual properties include; new inventions, literary and artistic works, unique symbols, brand names, fancy images, designs, and ideas among others. They are divided into two major categories which are; industrial property and copyright. Industrial property covers properties such as; inventions, trademarks, industrial designs among others while copyrights includes literary and artistic works (World Intellectual Property Organization, 2013). 1.2 Intellectual Capital Intellectual capital is defined as knowledge possessed by individuals of an organization that can be used to generate wealth, increase profits, gain new clients, invent and innovate new products and existing products respectively and eventually improve the state of the business venture. Intellectual capital includes skills and knowledge developed by the company itself during the production of goods and services, knowledge by the employees the company deems critical to the growth and development of the business and documents which contain crucial information on their; processes, clients and research which might be valuable to its competitors if they gain access to it (Margaret Rouse, 2007). 1.3 Intellectual property and Intellectual Capital in firms Many companies are showing greater innovative dynamism which is as a result of the impact of technological changes. There has been a new structure in productivity since 1990s which has since seen a boost in expansion of firms; this period of expansion is what people refer to as the ‘knowledge era’. They have set their foundation on knowledge which they now consider a source of sustainable competitive advantage over their business rivals. The presence of intellectual property and intellectual capital in firms has previously been ignored although it has always played a major role in the production process of goods and services and the companies’ management. Management has come to realize and appreciate its value in the corporate reality. This is because the management now sees the value of a person’s know-how and companies are resorting to training their employees. Firms are also investing in ways to retain customers, study the market behaviors and conducting research. This is to increase the value of the business and generate more wealth through the use of the intellectual property and capital (Journal of Knowledge Management Practice, 2011). For a new firm venturing into technology, its focus will be risks in the market, financial factors, management and the technology itself. At the beginning the firm is not likely to afford legal intervention because it devotes all its resources to the development of the technology and commercialization of its product or products. Legal intervention comes in case of a lawsuit against the firm from suppliers or creditors for non compliance with payment agreements or not following conditions of signed contracts. The secrecy of the intellectual property becomes something worth investing in compared to a patent which could easily be subjected to settling the litigation fees. This is because suits against patents cost more than suits against trade secrets. In the United States of America, a suit against patents costs $500,000 while suits against trade secrets cost $300,000 to $500,000. Following the illustrations given above, it is evident that intellectual properties and intellectual capitals are better ventures to invest in because they are safer, intangible, durable and their value can be increased through regular training. They are also cheaper to settle in case of suits (World Intellectual Property Organization, 2013). 1.4 Nature of competition in technology firms Currently The United States of America is enjoying the ranking of being the leading producer of high-tech products closely followed by Japan. The most competitive areas in the technology field include; computers and the communications. However, the transport (cars and motor cycles) sector has seen a drastic improvement in the recent years. There are firms that deal with superior technology and innovation and these firms include; google, facebook, youtube and skype. These are internet firms that have dominated their relevant markets which have little to no space for new entrants. Also included in this list is the software giant Microsoft (Adam Thierer, 2013). Monopoly is a type of market structure where there is only one seller. There are a few reasons why monopolies exist; 1 The owner may have exclusive rights to produce that specified good or service for a given duration for example; The United Shoe Machinery Company in 1937 was given exclusive rights to produce shoes for 17 years when the monopoly was broken in 1954. 2 If the firm is the sole supplier of the raw materials deemed necessary for the production of the goods or services. The Aluminum Company of America enjoyed monopoly power due to ownership of entire supply of raw material but the monopoly was broken in 1945 under provisions of Antitrust Laws. 3 A monopoly can also be created by the government when it decides to franchise a particular good or service. The government can create monopoly if the good or service provided has little to no returns which causes investors to shun form such investments 4 Monopoly exists when the initial capital to invest in that firm is too high causing investors to run away from such investments 5 If the venture is too risky for the investors. Many investors fear investments that are too risky. For these reasons and others, competition in advanced technology firms is not very intense. This is because there a few or one entrant in specific markets for the reasons given above. There are other technology firms that fall under the oligopoly market. This is where the firms produce products that are very similar; there are a few sellers in that market. Also smaller firms tend to follow the examples of bigger firms. The demand for the product is fairly inelastic that is; an increase or decrease in the prices of the goods causes a small to no change in the demand for the product. These include telecommunications companies and automobile companies (Witiger.com, 2011). The technology industry is a very fast paced industry and competition is mainly brought about by the constant new innovations that keep toppling over formerly dominant technologies. Consumers often go for products that are smaller, faster and most importantly better (Federal Trade Commission, 2009). 2.0 How intellectual property and intellectual capital have influenced competition in the technology company Intellectual property if used appropriately can be a powerful tool for competition, stability and risk mitigation on investment in technology firms. In the oligopoly market where there are few sellers who follow the lead of the bigger firms competition is very high. It is very high for both small scale firms and large scale firms. The technology industry is a very fast paced industry with new ideas and innovations of existing ideas and inventions coming up every day to take over the existing ideas and innovations. Intellectual property and capital has been embraced by many developing countries which as a result has encouraged a growth in FDIs (Foreign Direct Investments). Competition for new ideas and resources in the technology industry is practically cut throat where only the fittest can survive. This rate of growth is pushing management to put their staff through training regularly and some have put up incentives to maintain them (with their ideas, intelligence, expertise and talent) lest they lose them to their rivals. 3.0 Review Analysis From the definitions given, intellectual capital comprises of all intangible assets regardless as to whether they are included in the balance sheet or they have exclusive legal rights. Intellectual capital has been defined and interpreted in the context of a firm’s total assets whether they are put in writing or contained in an employee’s mind. Many countries, whether developing or developed are embracing intellectual property and intellectual capital as one way of increasing the value of their businesses and creating stability which has in turn improved competition in business. Technology companies are one of the biggest investors of intellectual property and intellectual capital given the intense competition in that industry. However, this is still subject to ability of one to enter that market. There are technology firms that we have established as monopolies and others as oligopolies. Competition in technology companies is more intense in the oligopoly market than in monopoly markets. We have discussed the intellectual property and intellectual capitals widely, let us look at their benefits; 1. They stimulate generation of more intellectual property and intellectual capital 2. They have resulted in acknowledgement and respect of intellectual property and intellectual capital 3. They drive stability in markets 4. Proper management will eventually generate capital which attracts more venture capitalists Technological innovation has recently been seen to shift from the industrial era to the knowledge era. This is seen in; 1. Increased complexity in the products created which bear more components of individuality that reflect the complexities of technological parameters 2. The products produced have higher knowledge content from scientific experiments rather than practical experience 3. Most technologies developed have a common base in science with applications that are multiple and varied and they can be developed further over time 4. Technology which has a short innovation cycle and an even shorter product life cycle In this knowledge era, for firms to retain their relevance in the market, they have to develop the capacity to acquire and distribute the knowledge rapidly. The knowledge can be; 1. Developed in-house by the company itself 2. Or acquired externally from other firms or even through imitation 3. Brought into the company by hiring employees with specific knowledge 4. Gained through training of employees or even hiring consultancy services The very fast pace and competitive nature of the technology companies, the firm’s survival in the economy is heavily dependant on efficient acquisition and management of knowledge and information. A firm will remain competitive as long as they are well informed and they invest well in intellectual property and intellectual capital. To remain relevant the firm’s innovation has to aim at devising effective ways to obtain, control and manage information. The management of the intellectual property and intellectual capital is controlled by the Intellectual Property Law and they are managed by organizations such as WTO (World trade organizations) which came up with TRIPs (Trade Related Property Rights). Trade Related Property Rights (TRIPS) is a set of agreements under the World Trade Organization where the members must adopt and enforce strong and non-discriminatory standards to protect intellectual property. 4.0 Conclusion The business aspect is changing wide and fast and so is the technology industry. The evolution of intellectual property and intellectual capital started way back in the 16th century with the passing of the first patent law under the statute of Anne in England, however it become a modern notion only in the 1990s. Since its modernization it has been embraced by nations in both developed and developing countries and it has seen tremendous growth and evolution in business and technology. This evolution has impacted many sectors in business ranging from information to competition. The business aspect has become a knowledge era with venture capitalists investing more in intellectual property and intellectual capital. The knowledge era has contributed positively in the socio-economic environment but it requires proper management or users of information may end up exploiting others such as the consumers, the government and even rivals in business. 5.0 References Gupta, A. S. 2000. Genesis of Intellectual Capital as Property. Retrieved on September 25, 2013 from < http://www.cpim.org/marxist/200001_marxist_int_prop_amit.htm> Claudia, S. 2003. Intellectual Capital in the Information Society. Retrieved on September 25, 2013 from < http://www.itu.int/osg/spu/visions/free/ITUIntCapitalpaper.pdf > Keith, E. M. 1997. The Role of Intellectual Property Rights in Encouraging Foreign Direct Investment and Technology Transfer. 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