Driving Growth: Economic Value Added Versus Intellectual Capital

This paper compares and contrasts Economic Value Added (EVATM) and Intellectual Capital (IC) as two technologies of managing oriented towards encouraging growth. The analysis suggests that EVATMand IC contrasts greatly. EVATMis a financial management system based on radical delegation and ‘empowerment’ and which therefore directs attention to the results created by managers. Based on financial micro-theory, EVATMis a performance measure that attempts to account more properly for the cost of capital, but more than that, it is also a management control system which seeks to create radically independent business units and minimize corporate staff. IC is a different control system concerned to encourage endogenous growth implemented via loosely coupled sets of non-financial measurements that become strong via stories and metaphors about the post-modern firm in the post-modern world. Here, based on theories of organizational knowledge and competence development, emphasis is put on mobilizing white collar productivity and creativity based on some form of evolutionary economics or resource-based theory. While EVATMlooks to managers as the movers of change, IC seems more systematically to promote the creativity possessed by employees.