The Rise of the Intangibles: knowledge is the economy of the future

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The Rise of the Intangibles:  knowledge is the economy of the future
From the Springboard content Lab

This might sound like the title of the next blockbuster Marvel movie, but it’s actually the storyline driving modern economies. For business owners, intangible assets represent a type of property that lacks physical form but can generate significant value for their owners.

Unlike tangible assets such as buildings, machinery, or inventory, intangible assets derive their worth from elements like knowledge, creativity, relationships, or reputation. They include intellectual property (IP), brands, customer relationships, software, data, or even an organization’s culture.

A great example of a creative intangible asset is the Marvel Cinematic Universe (MCU). This sprawling narrative powerhouse has generated nearly $30 billion in global box office revenue, proving itself to be one of Disney’s most valuable assets (Box Office Rewind: A History of the Marvel Cinematic Universe (So Far) – Boxoffice).

The MCU is much more than a series of films—it’s a tightly woven network of characters, stories, and audience engagement that consistently delivers value through merchandise, theme parks, and streaming platforms. Marvel’s unique combination of intellectual property and storytelling expertise epitomizes how intangible assets can drive extraordinary economic outcomes.

The economic impact of intangible assets extends far beyond the entertainment industry, influencing various sectors and driving overall economic growth.

The Power of Intangibles in Today’s Economy

How valuable are these intangible assets to the broader economy? The answer lies in their remarkable ability to create wealth. Just as owning tangible property like machinery or a building enables its owners to generate revenue, owners of intangible assets can leverage their knowledge-based properties to unlock significant economic value.

Consider the FAANG gang: Facebook (now Meta), Amazon, Apple, Netflix, and Google. Collectively, these five companies are valued at an astounding $4 trillion USD in stock market capitalization. While they own physical assets like data centers and office buildings, the bulk of their valuation is derived from their intangible assets. Their algorithms, brand equity, research and development, marketing strategies, and proprietary technology represent the core of their business success. Together, FAANG companies account for roughly 15% of the entire S&P 500 index (FAANG Stocks: Tech Giants Driving the Market).

Intangibles in the Canadian Economy

Canada, like other advanced economies, is increasingly relying on intangible assets to drive growth and innovation. Sectors such as technology, biotechnology, clean energy, and artificial intelligence (AI) showcase the country’s knowledge-based economy. Toronto, for example, has become a global hub for AI research, thanks to institutions like the Vector Institute and University of Toronto. Companies like Shopify, OpenText, and Constellation Software demonstrate how intangible assets like intellectual property, brand equity, and customer relationships can propel Canadian businesses to global prominence.

Moreover, traditional Canadian industries such as forestry, agriculture, and mining are leveraging intangibles like data analytics, automation, and R&D to enhance productivity and reduce environmental impact. For example, precision agriculture technologies are helping farmers optimize yields while conserving resources, showcasing how intangibles like software and data can transform even legacy sectors.

A Shift Toward the Intangible Economy

The ratio of intangible to tangible assets in the broader market has been growing steadily since the 1970s. By 2019, intangible assets made up 91% of the market value of the S&P 500 companies, representing a staggering $22 trillion in total value. For the S&P Europe 350 index, the trend is similar, with the share of intangible assets rising from 71% in 2015 to 74% in 2020. These numbers highlight a fundamental shift in how value is created and captured in modern economies. (Intangible Asset Market Value Study – Ocean Tomo)

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And this is trend is showing no signs of slowing down. According to CPA Ontario:

In advanced economies, intangible assets make up a greater proportion of business value and are recognized as a key source of innovation and growth. In the last 15 years investment in intangible assets has grown 400 per cent, eclipsing investment in tangible assets.

Covid-19 has accelerated the size and importance of intangibles in our economy.

Some 2.5 million Ontarians shifted to working from home and SaaS companies benefited from the resulting unprecedented level of investment in digitization.

Data from WIPO shows that this is truly a global phenomenon:

Despite disruptive global crises and rising interest rates, aggregate intangible investment touched US$6.9 trillion in 2023, more than doubling from US$2.9 trillion in 1995. Since 2008, the intangible investment growth rate has tripled that of tangible investment, which rose to US$4.7 trillion in 2023, the report shows.

Unlocking the Potential of Intangible Assets

For business owners, the rise of intangible assets underscores the importance of recognizing and leveraging these often-overlooked drivers of value. Whether it’s securing intellectual property rights, building strong brands, cultivating customer loyalty, or fostering innovative company cultures, businesses that prioritize their intangibles position themselves for long-term success.

Furthermore, policymakers and investors must also adapt to this new reality (not to mention accounts). Traditional valuation methods, which often focus heavily on tangible assets, may miss the true drivers of value in the modern economy (more on this in a future post). By developing new frameworks and tools to assess, protect, and invest in intangible assets, stakeholders can better navigate the changing economic landscape.

The Intangible Advantage

As businesses and economies continue to evolve, the importance of intangible assets will only grow. From Hollywood superheroes to Silicon Valley algorithms, these knowledge-based assets are reshaping the way value is created and captured across the globe. For entrepreneurs, companies, and nations alike, understanding the rise of intangibles isn’t just a Marvel-inspired story—it’s the key to future growth and innovation.

How do these trends affect the Atlantic Canadian economy, and how do we ensure that we are not left behind? Follow along as we explore the evolving intangible economy, highlight local entrepreneurs contributing to it, discuss methods and techniques to integrate IP-thinking into business strategy, and show how our regional innovation ecosystem, including the Springboard team, supports the growth of our knowledge-based economy.