The Impact of Intellectual Capital on Business Organization

Aymen Raheem Abdulaali

Abstract

The main purpose of this research is to examine the components of intellectual capital and how intellectual capital affects business organizations. The study also examines how the intellectual capital items are accounted for in the financial statements. Literature review and theoretical framework are used in describing the three components of intellectual capital, how they are recognized in the financial statements of an entity and the impact that they have in the business organization. Secondary sources of data such as journals and books are used in the study to qualitatively analyze the impact that the intellectual capital has on the business organization. Results of the qualitative analysis indicate that intellectual capital impacts the business organization in various ways such as enhancing the competitive advantage, facilitating innovation, enhancing the competency of the employees and increasing the organizational performance. Financial managers could make use of this research to gain insights on the categories of intellectual capital including the intellectual capital items to be included in the financial statements and those that should not be included.