There is no simple answer! Answers would follow lines like:

• “The national intangible (intellectual) capital includes knowledge assets of individuals, firms, institutions, communities, and government that represent current and potential sources for wealth creation and improved quality of life.” (Malhotra 2003, 24)
• “We would define IC (intangible capital) of nations as all intangible resources available to a country or region, that give relative advantage, and which in combination are able to produce future benefits.” (Stam and Adriessen 2008, 490)
• “[…] national intangible (intellectual) capital is comprised of the knowledge, wisdom, capability, and expertise that provide a country with a competitive advantage over other countries and determine its potential for future growth.” (Lin and Edvinsson 2011, 3)

Breaking up the complexity (and based on extensive literature reviews and since describing intangible capital of a nation requires the articulation of a comprehensive system of variables to help uncover and manage that nation’s invisible wealth) we elaborate the most commonly used four component capitals, namely human capital, market capital, process capital and renewal capital behind NIC:

• Human capital "Capacity and capability of people" at national level constitutes a population’s total capabilities as reflected in education, knowledge, health, experience, motivation, and expertise. These elements represent the key success factors in creating a competitive edge for a nation in the present and the future. Human capital also provides the resources for the development and cultivation of other areas of intellectual assets such as R&D and training, as the human factor is the most important link in the process of value creation.
• Market capital "Global business attractivity" refers to the general assets embodied in the nation’s relationship with the international market. It is the aggregate of a country’s capabilities and successes in providing an attractive, competitive solution to the needs of its international clients.
• Process capital "Operational functionality of the nation" is the cooperation and flow of knowledge that require structural intellectual assets, including information systems and national infrastructure. Such structural intellectual assets sustain and increase the output of human capital.
• Renewal capital "Capacity for knowledge creation, exploitation and innovation" refers to a nation’s capabilities, investments in research and development, and capacity for innovation. It provides the basis for future development.

In short:

As you notice: Human, market, process and renewal capital are inputs (constructors) for organizational, structural and, finally, national intangible capital NIC.

NIC indexes for human, market, process and renewal capital are calculated following a four step process:

• 1: We normalize basic indicator values to match a basic scale 1 - 10 (For indicators: See indicators below on site).
• 2: We take time into account = Some indicators have real effects only with time lags.
• 3: We look into the structure of the economy and its level of metropolization. Metropol and service focused areas tend to have a higher productivity than rural agricultural areas etc.
• 4: We finally look at the size of the economy, country. Size matters - positively.

Here are some examples of how these steps impact NIC indexes:

As you notice: Effects vary by country and indicator - making NIC indexes more reliable:

When calculating impacts of NIC we sort of use a residual, left over, approach: We first calculate how much of GDP formation and GDP growth can be estimated by taking

• money, i.e. plant, property and equipment (gross fixed capital)
• total working hours, i.e. workforce times working hour per year
• extraordinary resources (monetary value of natural, i.e. oil and financial, i.e. financial services)
• investments (money) in general intangibles (i.e. IT, software and R&D)

as inputs.

The left over, residual, part of GDP and GDP growth, not explained by these tangible drivers is momentous.

Tangible drivers explain (only) 28 % of GDP formation and productivity growth. Capital (money) and labor (working hours) only 10 %.

We therefore analyse the left over part using three major drivers of the economy:

• MTFP = TFP linked to global markets, trade and networking, i.e. economic performance enhancers embedded in global activity in general
• DTFP = TFP linked to domestic markets, consumption and networking, i.e. economic performance enhancers embedded in domestic activity in general
• NIC = National intangible capital measured with 48 indicators for human, market, process and renewal capital.

Taken together, the first and the second step explain about 77% of GDP formation and  productivity growth.

Main MTFP and DTFP indicators

GDP formation break up / Example / USA 2011

GDP growth break up / Example / Denmark 2011

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