GENEVA — The first study of “Intangible Capital” — which qualifies as branding, design and technology — shows that it accounted for nearly one-third of the value of manufactured goods sold worldwide, worth $5.9 trillion in 2014, with food, cars, and textiles and apparel the largest product groups in absolute terms, a report by the World Intellectual Property Organizations said.
“Intangible capital will increasingly determine the fate and fortune of firms in today’s global value chains. It is behind the look, feel, functionality and general appeal of the products we buy and it determines success in the marketplace,” said Francis Gurry, WIPO director-general.
The report, “Intangible Capital in Global Value Chains,” estimates intangible capital accounted for a nearly 30 percent share of the value added into global output of textiles and apparel, which reached nearly $2 trillion.
“We tend to spend more money on groceries, cars and clothes, so the overall income accruing to intangibles in these sectors turns out to be higher,” said Carsten Fink, WIPO chief economist.
Research findings indicate that buyer-driven global value chains, such as textiles and apparel, the report said, “realize larger returns to intangibles at the distribution stage” — more than 50 percent for textiles and apparel — whereas producer-driven global value chains such as motor vehicles realize those returns in earlier stages.
WIPO’s Gurry outlined that “intangible capital” in global value chains is the capital in all the nonmaterial inputs in the production process, including brands, reputation and marketing. He also added these elements “have become more important, and intellectual property plays an extremely important role because it protects these elements or components of intangible capital.”
Intangible capital also includes things such as managerial know-how and business information that companies protect largely through trade secrets, the WIPO analyst said.
Gurry noted technology and innovation, along with openness in international trade, “has transformed the face of global production” in the last 25 years.
“That process of production is the conversion of raw materials and components, the assemblage of those and the delivery to consumers. And this process increasingly involves, or has involved, chains of value, which span across a number of economies around the world,” he said.
The WIPO chief stressed “this is not a process that is finished” and noted intangible capital will continue to shape global value chains in the future.