• Know How

    December 2017

Intangible strategies

The information age has had a profound effect on all aspects of business. Chief among these is the fact that a company’s value is no longer constrained by the tangible assets on its balance sheet. Often a company’s most valuable asset is their ‘intangible’ assets - branding, training, research & development and software.

Uber is an oft-cited example of this phenomena. It owns no taxis, yet is worth more than every taxi company combined. The company’s value comes from its platform, branding and a somewhat dubious reputation. 

Jonathan Haskel and Stian Westlake’s new book, ‘Capitalism without Capital’ explores the trend towards investment in intangible assets. The book focuses on macroeconomic impacts, however there are some valuable insights for New Zealand businesses too. 

Haskel and Westlake argue that valuable intangible assets have four characteristics. They are scalable and synergise well with human capital and other intangible assets. However, the costs to develop these assets are often sunk and have a tendency to ‘spillover.’

Scalability means that an asset (e.g. a specific process or platform) can be re-used again and again with minimal reinvestment.

Valuable intangible assets can also synergise either human capital or other assets, which (provided the ideas don’t spillover) can provide a significant competitive advantage.

However, expenditure on intangible assets is often ‘sunk’ as these costs are difficult to recover, should you decide to sell the asset.

Another drawback is the ‘spillover effect’ where unique ideas or processes are often copied by competitors. As a result, developers don’t always reap the benefits of their time and expense. In this environment, the first mover advantage is becoming increasingly fleeting.

As large multi-nationals develop their intangible asset bases, the scalability of these products presents risks to New Zealand businesses, but opportunities too. Many large companies are looking for partners to break into the New Zealand market, or for early adopters of their products. As intangible assets move freely between borders, those New Zealand businesses willing to adopt new solutions stand to benefit. Conversely, internal development of intangible assets should be carefully considered, due to the risk of spillover.

Businesses that can carefully protect their own internally developed assets and successfully integrate with the latest innovations will be in great shape going forward.


Capitalism without Capital shows that the growing importance of intangible assets has also played a role in some of the big economic changes of the last decade. The rise of intangible investment is, Jonathan Haskel and Stian Westlake argue, an underappreciated cause of phenomena from economic inequality to stagnating productivity.