Valuation of intellectual capital in knowledge‐based firms : The need for new methods in a changing economic paradigm

Purpose – The purpose of this paper is to link two key disciplines in finance and science in a way which is representative of the many challenges in the development of the knowledge economy. However, the valuation of intangibles remains a contentious issue in finance. Design/methodology/approach – In this paper, the financial and economic issues pertaining to the valuation of intellectual capital are evaluated and addressed. Findings – An important aspect of raising capital is the ability to impute a fair value on the asset. Research limitations/implications – The investigative process involves evaluating and assessing the appropriateness and efficiency of current models and finds them to be inadequate in yielding the true value of intellectual capital employed in knowledge‐intensive firms. Practical implications – A new methodology for valuation is indeed required, and this value driver valuation processes may produce significantly better understandings of the worth of intellectual capital in the knowledge economy. Originality/value – This paper evaluates various methods that are currently used and recommends the development of a valuation process for new and evolving technologies.