World Intellectual Property Report 2017 – Intangible Capital in Global Value Chains (Russian version)

The modern global economy is profoundly shaped by the unseen forces of intangible capital, which now accounts for a significant portion of the value embedded in manufactured goods circulating worldwide. This pervasive influence extends across international manufacturing processes, where elements such as technology, design, and branding are no longer mere adjuncts but central drivers of success and competitive advantage. Indeed, a substantial one-third of the total value of manufactured products sold globally stems from these intangible assets.

From 2000 to 2014, the income generated from intangibles experienced a remarkable 75 percent increase in real terms, reaching an astounding 5.9 trillion US dollars in 2014. This figure is twice the contribution made by tangible capital, such as buildings and machinery, to the overall value of manufactured goods. This shift underscores a fundamental transformation in how value is created and captured within global production networks, emphasizing that the look, feel, functionality, and general appeal of products - all rooted in intangibles - increasingly determine a firm's destiny in the marketplace.

Intellectual property (IP) serves as the primary mechanism through which companies safeguard the competitive edge derived from their investments in intangible capital. Patents, trademarks, and industrial designs are instrumental in securing returns on innovation and branding efforts. The strategic deployment and management of these IP rights are crucial for businesses to capture value and maintain their position within intricate global value chains.

Consider the intricate global value chain of coffee. Here, intangible assets are pivotal, particularly in activities closer to the consumer. Innovation in processing beans and the final distribution of products, such as the ubiquitous coffee capsules, are driven by technology and design. These elements allow companies to differentiate their offerings and cater to evolving consumer preferences, thereby capturing greater value at various stages of the supply chain.

In the rapidly evolving photovoltaic industry, innovation is ceaseless and transformative. Intangible assets, particularly cutting-edge technology and design, are essential for firms to seize new opportunities and adapt to dynamic market conditions. The ability to develop and protect novel solar cell technologies and manufacturing processes is paramount for companies seeking to lead in this sector.

The smartphone industry offers a compelling illustration of intangible capital's dominance. For high-end smartphones, technology, hardware and software design, and powerful branding are the crucial intangible assets. Companies like Apple, Huawei, and Samsung leverage patents, trademarks, and industrial designs extensively to secure significant returns on their intangible investments. For instance, approximately 42 percent of the sales price of an iPhone 7 is derived from intangibles. Furthermore, component makers and technology providers within this ecosystem also utilize intangible assets to capture substantial value, relying heavily on IP to protect their contributions.

The rise of global value chains, while making consumer products more affordable and stimulating economic growth, also highlights how decisions regarding the location of production tasks and partnerships are intricately linked to the management of intangible capital. Developing economies, notably China, have strategically built their own intangible assets to participate and thrive in these global networks, demonstrating the potential for other nations to pursue similar strategies for economic development. The strategic importance of technology, design, and branding is thus undeniable, permeating every facet of modern production and shaping the global economic landscape.