when people hear the word capital they tend to think of money while that may be true to some degree the term means more than just dollars and cents the term capital is a broad one that is used to describe anything that provides value to the owner this includes cash as well as physical property real estate machinery precious metals and assets like knowledge 
knowledge capital which is also called intellectual or knowledge based capital is anything of value that results from people s experience skills knowledge and learning within an organization therefore it doesn t rely on the physical effort of its machines or other equipment as such this form of capital has immeasurable value and cannot be quantified this is why it s considered an intangible asset which is one whose value cannot be touched or measured as noted above knowledge capital largely depends on the skills and talents of individuals this gives companies an edge over their competition organizations with high knowledge capital may be more profitable or productive compared to those with lower knowledge capital businesses develop knowledge capital by encouraging employees to share information through white papers seminars and person to person communication when this capital is pooled together and shared the results can be worth a great deal knowledge capital is important because it reduces the odds that a company will have to reinvent the wheel each time a particular process is undertaken this is because its employees have access to documents detailing the necessary steps along with access to personnel who have undertaken similar activities companies must encourage their employees to share their skills and talent in order to fully exploit their knowledge capital special considerationseven though it may not be a physical asset knowledge capital still requires a significant amount of investment this means that companies may need to invest in the following in order to improve their knowledge capital keep in mind this isn t an exhaustive list and that organizations can take many other steps to invest in and improve their knowledge capital knowledge capital componentsknowledge capital has three main components human capital relational capital and structural capital each category is highlighted below in more detail human capital represents the contributions made to an organization by its employees utilizing their talents skills and expertise possessed only by individuals human capital can be harnessed and exploited by an organization it is not owned outright human capital can disappear when an employee leaves as such quality organizations focus on retaining creative and innovative workers as well as working toward creating a setting where such intelligence can be taught and learned it was not uncommon though for companies to enter into an employment contract with their employees especially senior level management to protect against the loss of knowledge capital through non competes in the event an employee leaves the company a non compete agreement or clause would typically prohibit that employee from working for a competitor for a specified period of time however in april 2024 the ftc banned the use of non competes 1relational capital is defined as the relationships between coworkers it also includes the relationships between workers and vendors customers suppliers partners and collaborators relationship capital also includes franchises licenses and trademarks as they have value only in the context of the relationship they have with customers strong relationships help corporations and other organizations boost their competitive advantage as such it allows them to access information and eases the flow of that information between individuals and may reduce risk and the chance of error it also gives them the opportunity to expand their customer supplier and resource bases this type of capital represents the non physical capital possessed by an organization such as processes methods and techniques that allow it to operate and enable it to leverage its capabilities structural capital may also include intellectual property such as databases code patents proprietary processes trademarks software and more an organization s structural capital allows it to integrate and weave everything together into a solid cohesive unit as such it encourages and promotes efficiency among all of its participants knowledge capital is unlike different physical factors of production such as land labor and capital that s because it is based on the skills that employees share with each other to improve efficiencies rather than physical items knowledge capital usesfor any business to be successful it must effectively and efficiently harness and exploit the potential of its knowledge capital this requires management to be aware of and work toward efficient knowledge management which is the act of creating disseminating managing and utilizing the talents and knowledge that exist in an organization another important caveat for companies with respect to their knowledge capital it s an asset in need of constant investment of both money and time because like everything else knowledge capital depreciates and is not finite people need to be given the opportunity to continually improve and upgrade their skills in order to maintain their talents the more a company invests in its knowledge capital the more value it holds by continuing to invest in knowledge capital companies can expand their r d operations create new business models increase their patents and designs and continue to innovate examples of knowledge capitalalthough it may not be a physical asset we can still determine the forms that knowledge capital takes it may take shape through the leadership of an executive or management team member having the confidence and drive to keep people moving toward a common goal is a very valuable asset for any company another common form of knowledge capital is practical knowledge having someone who is well versed in coding and programming for instance may be valuable to a small internet startup knowledge capital leads to some of the biggest innovations we know today consider the intellectual prowess and know how that went into developing some of the world s famous logos such as mcdonald s golden arches the nike swoosh or even the apple logo an apple with a bite out of it considerable knowledge also went into some of the food we eat and the tools we have at our disposal such as the formula for coke or the invention of the smartphone 