Intangible Assets for Systemic Change in Social Entrepreneurship

• In Event: Nonprofit Finance & Intangible Assets

Abstract

The purpose of this paper is to introduce the relationship between intangible assets and systemic change as a qualitative study. Do intangible assets contribute to systemic change? If yes, why, and how?

Haskel et al. (2017) define intangible assets as patent, copyright, design, intellectual property rights (IPR), trademark, training, branding, etc. Training improves human resources which are the most valuable asset in organizations (Chareonsuk et al. 2010). Mindset is shared through training (Zeeb 2020). Mindset creates culture (Romero 2017). Organizational culture is an intangible asset (Chareonsuk et al. 2008). The value of intangible assets is amplified and visualized by information technology quickly (Haskel et al. 2017). Intangible assets, as Haskel et al. (2017) explain, now play a huge role in the world economy which is experiencing a fundamental shift. For example, the market value of Microsoft, a technology giant firm, was $250 bn in 2006. However, the traditional asset (e.g. plants and equipment) were only $3 bn, 4% of Microsoft’s assets and 1% of its market value in 2006. “Capitalism without capital” is emerging and spreading globally. Intangible assets account for $21.03 trillion in 2018 and 90% of the total assets in 2020 in the S&P 500. Why have intangible assets expanded so much and rapidly? The four characteristics of intangible assets are responsible - (1) sunk cost, (2) spillover, (3) scalable, and (4) synergy. Radonić et al (2020) introduce ROIA (Return on intangible assets) as an evaluation metric.

The concept of systemic change is based on systems thinking (Senge et al. 2007, Meadows 2008). Social systems are complex, so do social problems (Westley et al. 2009). Social problems arise from flaws in social systems. Therefore, it is safe to say that a social problem is a systemic problem (e.g. systemic racism). Systemic change is achieved when the flaws in the social system are fixed through legal reform, behavioral change, and/or cultural change.

Then, how do intangible assets work in the pursuit of systemic change in social entrepreneurship? Buonomo et al. (2020) review intangible assets in nonprofit organizations and argue that intellectual assets are important in NPO management. Castilla-Polo et al. (2020) state that intangible assets play an important role in cooperatives aiming for sustainable development. However, these discussion does not go beyond how intangible assets contribute to systemic change.

This paper introduces how intangible assets such as knowledge, mindset, and organizational culture contribute to systemic change by presenting a conceptual framework. Cultural change derived from mindset change by social entrepreneurship leads to systemic change. Intangible assets are diffused by followership and experience sharing. Intangible assets also create economic flows such as donation memberships and subscription models, which generate not only social value but also economic value. Economic value facilitates scaling of social entrepreneurship.

The originality of this study is to clarify how intangible assets contribute to systemic change, and to share the importance of the concept of intangible assets for social entrepreneurship practice and research.

Author

• Yutaka Tanabe, Game Changer Institute