Research & Development (R&D)

The value derived from a company's capacity to develop new products, services, processes, and business models. Innovation capital encompasses R&D capabilities, creative talent, experimentation culture, and the pipeline of ideas at various stages of development.

The accounting practice of recording an intangible expenditure as an asset on the balance sheet rather than expensing it immediately through the income statement. Under IAS 38, development costs may be capitalised when specific recognition criteria are met, whereas research costs must always be expensed.

An expenditure that has already been incurred and cannot be recovered, regardless of future decisions. While sunk costs should not influence forward-looking investment decisions, the accumulated effect of past intangible investments — in R&D, brand building, and organisational development — creates the stock of intangible capital that drives future value.

The economic value of a workforce's collective experience, skills, knowledge, creativity, and health. Investment in human capital through recruitment, training, development, and retention is a key intangible asset category and a primary driver of productivity growth.

The ongoing costs of running a business, including salaries, rent, utilities, marketing, and professional services. Unlike capital expenditure, OpEx is expensed immediately on the income statement.

The unintended transfer of knowledge from one firm or sector to others, creating wider economic benefits that the original investor cannot fully capture. Knowledge spillovers are a defining characteristic of intangible investment and a key justification for public policy support of R&D, education, and innovation.

The process of projecting a company's future growth trajectory based on historical data, market conditions, and investment patterns. Incorporating intangible asset data and productivity trends significantly improves forecast accuracy and reduces investor uncertainty.

The systematic monitoring and management of a collection of investments. For VC and PE firms, portfolio oversight includes tracking financial performance, productivity metrics, intangible asset development, and strategic milestones across all portfolio companies.