What is an Asset?
I had a lot of new questions after analyzing the survey data. I wouldn’t be able to answer them quickly, so I spent some time thinking about how my experience as a manager in the nonprofit sector could help me chip away at big questions.
I had staffed committees of the board for every organization that I worked for over the years. I kept returning to the governance team implications of intellectual property. I could not think of a single time when intellectual property came up as one of our organizational assets or something we should be managing. This reflection led me to several big questions, the first being: How are IP assets similar or different from other assets and does that matter for governance teams and fiduciary duty?
I started with exploring: what is an asset.
In finance and financial accounting, an asset is an economic resource. The balance sheet of an organization records the monetary value of the assets owned by that organization. It includes actual cash and other valuables, i.e. assets, belonging to an organization. An asset, in finance, is anything tangible or intangible that can be owned or controlled to produce value and that is held by a company to produce positive economic value.
Assets are further broken into two major categories: tangible assets and intangible assets. Tangible assets contain various subclasses. The most common are current assets. Current assets are cash and near-cash (or liquid, meaning they can be fairly easily converted to cash) assets like stocks, bonds, and mutual funds. Another subclass is fixed assets. Fixed assets generally refer to resources that have a physical form, such as money, equipment, buildings, land, and inventory.
Intangible assets are non-physical resources and rights that are valuable to the firm because they can give the firm some kind of advantage in the marketplace. Intangible assets include an organization's goodwill, copyrights, trademarks, patents, and trade secrets.
What is Valuable About Intellectual Property Assets?
Intellectual property (IP) assets fall into the intangible asset category and are strategically used to generate revenue, expand business opportunities, recruit and retain talent, attract investors, and to secure a market niche. As I've written about previously, commercial firms are increasingly acknowledging that IP is a primary source of a firm’s value and represents a large portion of the market capitalization in publicly traded firms. The survey research indicates that nonprofits also leverage their IP assets for similar marketplace goals, though it is not part of the popular management literature for the sector.
The literature on intellectual property and the commercial firm is extensive - both in academic literature and popular press. The corresponding literature on intellectual property in the nonprofit firm is miniscule in comparison. Despite the lack of IP content in academic literature and practical resources, the survey responses indicate that IP is created, it is leveraged, and, it creates value for nonprofit organizations in a variety of marketplaces: talent recruitment, board recruitment, public awareness and opinion, funder awareness and opinion, and donor resources. Just to name a few key marketplaces.