IP and other ‘intangible capital’ provide 30% of the value of manufactured goods

By Ideas Matter

Whilst labour and tangible capital such as buildings and machinery are vital for firms to produce and generate income from manufactured goods, ‘intangible capital’ such as technology, branding and other intellectual property now represents 30.4% of the total value derived from manufactured products world-wide.

A new study by the World Intellectual Property Organisation (WIPO), ‘Intangible Capital in Global Value Chains’, examines national and international trade statistics and company data on the value that labour, tangible capital, and intangible capital provide in the global value chain, and among its findings also reported that IP and other intangible capital now contribute more than twice as much as buildings, machines and other tangible capital to the world’s USD 5.9 trillion value chain for manufactured goods annually.

Smartphones, for example, are manufactured products that incorporate a wealth of intangible capital, including technology, the design of software and hardware, and branding.  The leading manufacturers such as Apple, Samsung and Huawei derive between 34% and 42% of the total value of their smartphones from such intangible capital.  Smartphone firms and technology providers rely heavily on patents, trademarks and industrial designs to realise their return on intangible capital.

The WIPO report makes a detailed examination of other sectors where intangible assets provide significant value, particularly the solar-panel and coffee industries, and notes that three product groups – food products, motor vehicles and textiles – account for close to 50 percent of the total income generated by intangible capital in the manufacturing sector.   

"Intangible capital will increasingly determine the fate and fortune of firms in today’s global value chains,” said WIPO Director General Francis Gurry. “It is behind the look, feel, functionality and general appeal of the products we buy, and it determines success in the marketplace.” 

“Intellectual property, in turn, is the means by which companies secure the competitive advantage flowing from their intangible capital," explained Gurry.

For further information, see the full report here, and WIPO’s press release, launch event, highlights, video and other related material here.