Strategic relevance of intellectual capital in European SMEs and sectoral differences

As the Lisbon Agenda declares the aim for the European Union to become the most dynamic and competitive knowledge-based market in the world until 2010, management instruments are needed to support companies achieving this ambitious goal. Small and medium-sized companies (SMEs) are especially affected by this plan as they are the driving force of Europe's economy. To obtain their competitive advantage, it is crucial for SMEs to utilise knowledge efficiently and to enhance their innovation potential. Thus, managing their specific Intellectual Capital (IC) becomes more and more important for future-oriented organisations. As the value of knowledge highly depends on its particular strategic context it is neither possible nor meaningful to measure the value of knowledge in absolute terms. Knowledge should rather be evaluated regarding its potential to support the company's individual strategic objectives. A practical way to tackle this challenge is the methodology developed by the German pilot project "Wissensbilanz - Made in Germany" and the European pilot project "InCaS: Intellectual Capital Statement - Made in Europe". By applying this method in more than 50 German and 25 European small and medium-sized enterprises it was possible to support the participating companies in identifying, evaluating and developing their strategically relevant knowledge. Furthermore it helped to gain comparable data about crucial knowledge in SMEs and to develop first strategic recommendations in an empirical study. This paper summarises how the InCaS method supports companies developing a knowledge-based strategy. Moreover it describes research results gained from the German and European project about the strategic relevance of particular IC factors in general and their relevance depending on the business sector. Whereas for the German project the differences between the sectors "Industry" and "Services" have been analysed, the results of the European InCaS project allowed for a more detailed analysis between the branches "Business Services & IT", Machinery & Equipment", "Construction", "Electronics" and "Retail Trade & Other Services". Besides the overall dominance of Human Capital factors the results indicate that companies in the Industry sector focus on knowledge management activities based on IT and explicit knowledge (codification strategy). The strategically most relevant knowledge in this sector is professional competences, i.e. specialised know-how needed to run the company's main business processes. Service companies, on the other hand, seem to focus on their individual employees' expertise and informal knowledge transfer if they want to ensure long-term and strategic business success (personalisation strategy). In this sector, motivation and leadership abilities are strategically equally important or even more important than specialised know-how