1. From Entrepreneurial Skills to Intangible Assets in the Creation of Knowledge-Based Firms Pedro Borges de Almeida Orientator:Prof. Rui Miguel Loureiro Nobre Baptista Co-Orientator:Prof. Pedro Filipe Teixeira da Conceição Master of Science on Engineering Policy and Management of Technology

2. 2003/04/14Pedro Almeida - MSc Thesis2 Presentation Outline Research Theme & Hypothesis Intangible Assets: what they are, their Economics & evaluation methods Entrepreneurial Skills and Intangible Assets generation in the creation of KBF’s Empiric Research: Methodology, Sample, Variables & Results Outcomes Implications Future Research

3. 2003/04/14Pedro Almeida - MSc Thesis3 Research Theme & Hypothesis Research Theme –Knowledge-Based Entrepreneurship Entrepreneurial Skills in Knowledge-Based Ventures KBF’s value – Identification and Assessment of Intangibles Research Hypothesis –The higher the level of Entrepreneurial Skills of an individual, the higher the level of performance of an emerging KBF by him/her created and managed.

4. 2003/04/14Pedro Almeida - MSc Thesis4 Intellectual Property Market Assets Infrastructure Ass. Human Assets Intangible Assets Looking at Intangibles Intangible assets in an organization correspond to its non-tangible goods, entitling to future benefits, which are closely related to knowledge resulting from human intelligent action -Management philosophy -Corporate culture -Management processes -Business processes -Information systems impact -External relations -Networking -Standards fulfilment -Brands -Positioning -Clients databases -Firm’s name -Distribution channels -Licenses & agreements -Contracts -Interaction with environment -Partnerships -Patents -Copyrights -Design rights -Trade secrets -Process development -Products & services -Technologies -Intelligence -Leadership -Knowledge -Skills -Competences -Attitudes -Spirit of initiative -Team spirit -Sociability

5. 2003/04/14Pedro Almeida - MSc Thesis5 Economics of Intangibles (*) Scalability Non rivalryNon rivalry Growing benefitsGrowing benefits Network effects Positive feedbacksPositive feedbacks Network externalitiesNetwork externalities Standards emergenceStandards emergence Partial excludability SpilloversSpillovers Fuzzy property rightsFuzzy property rights Private vs Social benefitsPrivate vs Social benefits Inherent risk Sunk costsSunk costs Creative destructionCreative destruction Risk sharingRisk sharing Transaction difficulties Contractual problemsContractual problems Low marginal costsLow marginal costs Asymmetric informationAsymmetric information vs (*) Source: Lev, B. (2000), Intangibles – Management, Measurement and Reporting, New York, New York University, http://www.baruch-lev.com/

6. 2003/04/14Pedro Almeida - MSc Thesis6 Different Economics for Different Intangibles

7. 2003/04/14Pedro Almeida - MSc Thesis7 Intangibles Evaluation Methods DIC – Direct Intellectual Capital Methods Direct estimation of intangibles financial value through identification and evaluation of their various components MCM – Market Capitalization Methods Calculation of difference between market capitalization and book value of firm. Difference assumed as being intangibles value ROA – Returns on Assets Methods ROA compared with industry/sector average. Difference multiplied by average assets of Firm and divided by average share cost of Firm’s own capital or reference discount rate to estimate intangibles value SC – Scorecards Methods Identification of Firm’s intangibles and establishment of a set of indicators. May not involve financial evaluation. A composite index may be produced.

8. 2003/04/14Pedro Almeida - MSc Thesis8 Positioning of Intangibles Evaluation Methods Organizational level only Identification of components Financial evaluation Non financial evaluation Method Types MCM Market to Book Value Tobin’s q IAMV  ROA VAC  Knowledge Capital Earnings Calculated Intangible Value HRCA DIC EVA  Citation- wheighed Patents Inclusive Valuation Methodology Technology Broker The Value Explorer  Intellectual Asset Valuation SC IC Index  Skandia Navigator  Balanced Scorecard Intangible Assets Monitor Value Chain Scoreboard  Magic SC Methods are the only ones with a limited capacity for use in emergent KBF’s

9. 2003/04/14Pedro Almeida - MSc Thesis9 Entrepreneurial Skills(*) in the Generation of Intangibles Technical Skills Technical Knowledge Experience Personal Skills Behaviours Instrumental Skills Inter-personal Relationship Leadership Management Skills Marketing Human Resources Finance Strategy Human Assets Intellectual Property Market Assets Infrastructure Assets (*) Resulting from research and field work performed by CPIN since 1998

10. 2003/04/14Pedro Almeida - MSc Thesis10 Questionnaire Design & construction Analysis & treatment of Replies 1st Level Treatment 2nd Level Treatment Research universe definition Research Methodology Analytical framework design Results from previous research 62 firms Previous universe 37 firms New entries. Text format Electronic format DesignQuestions Structure Enlargement to KBF’s. Geographic enlargement Operational testIssue Follow-up & monitoring Replies gathering Table of observations (primary analysis) Performance indicators (secondary analysis) Entrepreneurial Skills indicators hieracrchisation Expalanatory Variables selection Test of Hypothesis Discussion, conclusions & future research

11. 2003/04/14Pedro Almeida - MSc Thesis11 Empiric Research Sample

12. 2003/04/14Pedro Almeida - MSc Thesis12 Research Variables and Hypothesis Equation Explanatory variables –[INST_SKILLS] – Instrumental Skills –[PERS_SKILLS] – Personal Skills –[TECH_SKILLS] – Technical Skills –[MAN_SKILLS] – Management Skills Entrepre- neurs INST SKILLS PERS SKILLS TECH SKILLS MAN SKILLS A1.671.331.002.17 B1.670.170.001.50 C1.330.831.670.83 D1.671.332.00 E2.671.670.331.17 F1.670.501.670.50 G1.672.001.672.17 H2.331.502.331.83 Dependent variable –[  PROD] – Absolute variation of Productivity – Effective variation of Productivity in value  PROD i = (  PROD i (1999/1998) +  PROD i (2000/1999) ) / 2 Hypothesis Equation –  PROD i = C 2 +  2 INST_SKILLS i +  2 PERS_SKILLS i +  2 TECH_SKILLS i +  2 MAN_SKILLS i +  2

13. 2003/04/14Pedro Almeida - MSc Thesis13 a.Predictors: (Constant), Management Skills, Technical Skills, Instrumental Skills, Personal Skills b.Dependent Variable: Variation of Productivity (effective value).031 Research Results (i) Scatterplot Dependent Variable: Variation of Productivity Variation of Productivity in value Regression Adjusted (Press) Predicted Value Results in line with Prediction Prediction tends to underestimate results

14. 2003/04/14Pedro Almeida - MSc Thesis14 Research Results (ii) Variation of Productivity in value Instrumental Skills.068 Positive correlation Non conclusive due to significance level Variation of Productivity in value Management Skills.037 Apparent indifference Acceptable statistical result Variation of Productivity in value Personal Skills.018 Positive correlation Good significance level Variation of Productivity in value Technical Skills.015 Negative correlation (less evident) Good significance level

15. 2003/04/14Pedro Almeida - MSc Thesis15 Intellectual Prop. Outcomes Infrastr. Assets Infrastructure Assets Market Assets Managem. Skills Instrum. Skills Technical Skills Personal Skills Human Assets Start-upEmerging phase“Structured” phase time value Intellectual Prop. Intellectual Property Non-conclusive results Reduced influence Likely negative influence Creation of Systemic Process Preparation Intellectual Prop. Personal Skills

16. 2003/04/14Pedro Almeida - MSc Thesis16 Implications (i) The individuals are key to value creation –Education and training (formal + informal) –S&T policy complemented by promotion of entrepreneurial spirit & culture –Valorization of individuals in society Training for Entrepreneurs should incorporate differentiation of stages in Firm creation / growth processes Networking & clustering important for value creation in emergent KBF’s

17. 2003/04/14Pedro Almeida - MSc Thesis17 Implications (ii) Key Entrepreneurial Skills and their contribution to generation of key Intangibles should integrate the core of: –Business Planning in KBF’s and their focus on capacity to create value in a context of change & uncertainty –Networking, “co-opetition” & clustering business strategies as drivers for value creation in Knowledge Intensive Firms Flexible business & management models based on individual & team Skills may get better results in emergent KBF’s KBF’s mentoring activities incorporating Entrepreneurial Skills evaluation outcomes

18. 2003/04/14Pedro Almeida - MSc Thesis18 Future Research (i) To Strengthen current findings by: –Using larger samples & longer time series –Performing case studies & complete entrepreneurial Skills evaluations –Fine tuning: Firm’s dimension, age, sector, technological specialization... Specific entrepreneurial Skills To Deepen knowledge about: –Economics of each specific category of Intangibles –Correlations between each dimension of entrepreneurial Skills and different categories of Intangibles

19. 2003/04/14Pedro Almeida - MSc Thesis19 Future Research (ii) To better assess less clear findings: –Influence of Instrumental Skills? –Negative correlation between Technical Skills & Firm’s performance? –Indifference to Management Skills? To validate the metrics used for assessing Firm’s performance – proxy for Intangibles generation To refine concept of “Knowledge-Based Firm” To introduce non financial performance indicators Methodological development for assessing Intangibles generation / value creation potential in emerging KBF’s