A SIMULATED APPROACH TO VALUING KNOWLEDGE CAPITAL Open Access
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Valuing knowledge capital as represented by intangible assets remains one of the most difficult issues to solve. At the heart of the issue is that intangible assets cannot be valued until they are sold. Yet, without knowing the value of the assets, it is difficult to price them for sale. Compounding the issue is the fact that every organization places a different value on knowledge capital. What is important to one organization may not be important to another, thus making it difficult to develop a universal valuation model. One method to address this issue is to simulate a knowledge assets marketplace and allow buyers and sellers to value knowledge assets within a fictional trading market.The purpose of this research was to develop a simulation model to gather information about the value of knowledge assets. The Knowledge Asset Valuation game was developed as the simulation model. Real option pricing was selected as the financial model to value the knowledge assets. Real option pricing provides the ability to account for the flexibility inherent in every business decision including the option to delay, abandon, or grow an investment. In contrast to traditional capital budgeting techniques, real option models allow businesses to model financial decisions in a manner more closely tied to how they actually conduct business. The Knowledge Asset Valuation game (KAV) allowed players to learn to buy and sell call options on knowledge assets including human, structural, and customer assets. The price of the call option that the players set is said to be the real option value of the knowledge assets. The value determined by the players was then compared to the true value provided by the trinomial option pricing model. While the findings from this study were inconclusive, it showed evidence of being an excellent tool for addressing the complexities of valuing knowledge capital. First, the research proved that the trinomial valuation model is an appropriate model for valuing knowledge capital. Second, the research supports the notion that the valuation of knowledge assets using real options is an intricate concept requiring advanced training in the subject. Lastly, the research showed that that the valuation of knowledge assets in a real world environment is subject to economically irrational behavior.