Intangible capital has an important role in the knowledge-based economy we’re living in. Along with physical capital, several non-physical assets are used to produce goods and services. Well-known examples are software, data, patents, brands, and organisational knowledge. In contrast to physical capital investments, intangible investments exploit fewer natural resources. However, intangible capital is also more difficult to measure, and poor measurement gives a biased picture of economic development. Intangible capital generates future benefits and competitive advantages, therefore investing in intangible assets is vital for modern firms to face the challenges of highly dynamic business environments.

Intangible capital also creates innovations, which are essential for the economy as they can improve productivity. In firms, innovations are typically motivated by improvements in output or production processes. Innovation can lead to more energy-efficient technologies and hence less energy and material consumption. Therefore, the role of innovation in material use and energy consumption is important from the perspective of environmental conservation and sustainable development. On the other hand, physical capital is still the main source of production in many industries and plenty of organisations struggle to generate intangible capital. The GLOBALINTO project (2019–2022), coordinated by the University of Vaasa, has given a broad insight into the intangible capital economy in Europe and developed new ways to measure intangible capital.

Technological change and sustainable economy

The motivation for my research comes from the potential of intangible capital substituting the usage of physical resources and its contribution to sustainable development. Currently, digitalisation and generative artificial intelligence (AI) are driving a technological change revolution. As a general-purpose technology, AI strongly complements the use of other assets. History has shown us that general-purpose technologies, such as the printing press and the internet, have shaped the economy remarkably since these technologies can be used widely in different applications. Due to the significant potential of AI, it is of great interest to measure the economic effects of the AI revolution.

Research on these topics can give important insights into technological change to improve productivity and help to overcome the macroeconomic slowdown. For organisations, understanding intangible capital and innovation is essential in responding to challenges like increasing interest rates, fluctuating demand, and sustainability concerns. Increased knowledge on these themes can benefit companies and decision-makers in many ways; it can help to identify which intangible resources are important across industries and how sustainable development can be promoted with the help of intangible capital. Furthermore, research can shed light on how AI complements other investments in intangible capital such as organisational capital, skills, and innovation.

Vesa Loven
Doctoral researcher
Economics
University of Vaasa