What Is Knowledge Value?

Knowledge value is a business concept with ancient origins that places an inherent value on knowledge, not just products of manufacturing and assets. It can be difficult to value knowledge accurately, as it is a challenging commodity to place an arbitrary value on. Accounting practices often do not encompass knowledge value, and this can result in undervaluations of companies that have the bulk of their assets in the form of stored knowledge among employees, rather than more tangible commodities that can be easily bought, sold, and transferred.

Some proponents of knowledge value argue that knowledge can be more valuable than the product itself. A product like a mug has a specific use and value to consumers, but the knowledge of the process used to make it is even more important. A consumer can easily replace a broken coffee mug after dropping it on the floor, but the knowledge needed to make it is not as easily replaced or transferred.

This has become a particularly pressing concern with traditional arts and crafts. Many nations have programs that focus on preserving traditional techniques of making and handling things, with the goal of preventing the loss of knowledge. As craftspeople age and die, their cultures lose the valuable knowledge they acquired through their lives, unless they are able to train apprentices or provide information to representatives who preserve it for future generations.

Within a corporate setting, knowledge value can be an important aspect of managing human resources. Employees with key knowledge like familiarity with processes and a broad depth of skills may be more valuable than low-level employees who lack that knowledge. They may be entitled to more pay and benefits, and they can also leverage their positions to request wage raises and negotiate other aspects of their employment. If an employee has a high knowledge value, he is worth more to the company, and there is an incentive to keep him.

The accumulated knowledge value of a company can also be important in mergers and acquisitions. A company may argue that it is worth more than the price offered because of what its employees will bring to the deal. It can threaten to walk away from the deal if it doesn't get an offer it likes, or feels that its employees would be better served elsewhere. Evaluation of companies in terms of the knowledge value contained among their employees can be complicated to perform, especially when proprietary information is involved.