Page 29 - Intangible value

EXPORT REVENUE FROM INTANGIBLES
Although exports do not directly tell us about value added or its increase, it is interesting to examine the export reve- nue intangibles provide in Finland. Export revenues from intangibles can be roughly divided into four categories.
a) ROYALTIES AND LICENCE FEES
First of all, there is export revenue in the form of royal- ty and license revenues. Here foreign companies pay for using intangible assets owned by the Finnish units. This includes the use of patents, copyrights and different kinds of property protected by copyrights. In 2013, these exports revenues totalled €2.7 billion in Finland. Export revenue through royalties and license revenues are the most obvious channel for revenue from intangibles.
b) INTERMEDIARY TRADE
Intermediary trade provides more or less the same amount of revenue. Intermediary trade often means that a unit in Finland buys goods from a foreign company and sells them to another foreign company without the goods ever entering Finland. The trade margin between the sales and purchase prices is recorded as Finland's service exports under the term intermediary trade. Espe- cially in intermediary trade within a corporate group, the trade margin is really the output from intangible assets. Services can also be sold through intermediary trade.
c) OTHER SERVICE EXPORTS
Other service exports can also be classi ed as intangible exports. In 2013, these export revenues were as much as €16.4 billion in Finland. Information technology and telecommunications accounted for nearly €5.2 billion and construction and project deliveries for €1.6 billion.
d) INTANGIBLES WITHIN GOODS TRADE The most dif cult task is to estimate the role of patents, brands and other intangible factors when the value added they provide is included in the price of exported products. It is obvious that this also brings export revenue to Finland but there is currently no information about the amount.
However, it is important to notice that many companies are able to choose between categories a, b and c. This was revealed in a previous project carried out by Etla, the Research Institute of the Finnish Economy, in which the operation of global value networks was studied.19 It was found out in that context that some companies used all these three ways to bring revenue from intangible as- sets from their foreign subsidiaries to Finland. In some countries, the corporate group concerned received roy- alties from its subsidiaries, in some others this corporate
group did the same through intermediary trade and in the third group of countries the revenue from intangibles was earned through goods export.
The variations in the value of intangible and tangible cap- ital may be different. In the long term, the value of tangible assets will probably vary less than that of intangible as- sets. If a company has invested in, for example, properties or machines, the value of these assets will probably not disappear entirely, at least not in a couple of years. It is also unlikely that their value would multiply within a short space of time. However, the value of brands, patents, technology or other intangible assets may vary a lot. For example, the value of Nokia's Symbian operating system declined very fast during 2011. On the other hand, an in- crease in the value of intangible assets may also multiply in a very short time, as proved by Apple.
7 Several terms are used in literature to describe intangible invest- ments/intangible capital or parts of them. These terms include in- tellectual assets/capital, organisational assets, knowledge capital and intellectual assets.
8 See e.g. Lev, 2003 Lev, B. (2003) Remarks on the Measurement, Valuation, and Reporting of Intangible Assets. NYU Working Paper No.2451/27468.
9 9 Seee.g.Fadur,C-I.andMironiuc,M.(2013).Studyontheper- ception of accounting professionals concerning intangible assets and intangible capital. Theoretical and Applied Economics, 20, p.77-98.
10 Hulten, C. (2013). Stimulating Economic Growth through Knowl- edge-Based Investment. OECD Science, Technology and Industry Working Papers 2013/02, OECD, Paris.
11 Huovari, J. and Maliranta,M. (2008). Aineettomien investointien merkitys talouskasvulle. In Huovari (ed.). Aineeton pääoma ja talouskasvu. Tekes Review 230/2008, Tekes, Helsinki. Jalava, J., Aulin-Ahmavaara, P. and Alanen, A. (2007). Intangible Capital in the Finnish Business Sector, 1975-2005. PTT Reports 100, Peller- vo Economic Research PTT, Helsinki.
12 Sainio, M. and Koistinen-Jokiniemi, P. (2014). Kansantalouden tilinpito uudelle vuosikymmenelle. Kansantaloudellinen aikakaus- kirja, 110, p.391-405.
13 Corrado, C. A. & Hulten, C. and Sichel, D. E. (2006). Intangible Capital and Economic Growth. NBER Working Papers 11948, Na- tional Bureau of Economic Research, Inc.
14 Piekkola, H. (2012). Aineeton pääoma – talouskasvun ytimessä. Kansantaloudellinen aikakauskirja, 108, p.20-32.
15 Dal Borgo, M., Goodgirdge, P., Haskel, J. and Pesole, A. (2013). Pro- ductivity and Growth in UK Industries: An Intangible Investment Ap- proach. Oxford Bulletin of Economics and Statistics, 75, p.806-834.
16 Corrado, C., Haskel, J., Iommi, M. and Jona-Lasinio, C. (2012). Intangible Capital and Growth in Advanced Economies: Measure- ment and Comparative Results. CEPR Discussion Paper No 9061, Centre for Economic Policy Research, London, UK.
17 OECD (2013). New Sources of Growth: Knowledge-Based Capital. Key Analyses and Policy Conclusions. Synthesis report.
18 OECD (2013). New Sources of Growth: Knowledge-Based Capital. Key Analyses and Policy Conclusions. Synthesis report.
19 Ali-Yrkkö, J. (2013). Mysteeri avautuu – Suomi globaaleissa arvo- verkostoissa. ETLA b 257, the Research Institute of the Finnish Economy.
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