News Letter

Ahmed Ali Mohammad

SBE, Vol.20, No.1, 2017

ISSN 1818-1228

Qatar University

entails the introduction of new organizational

forms (Janszen, 2000). The success of this

innovation processing cycle always increases

net value for customer’s community and

eventually their loyalty. The interesting

advantage to note is that the result of the above

process can be a source to create extra cash

flows and then increasing shareholder value

(Holsapple, 2003). Not surprisingly, the major

final impact will extend to affect both dividends

and share prices through shareholders value.

Creating value is a must to create knowledge

cash and increasing shareholder value. The

comprehensive innovation process above

entails a new accounting logic match nature,

dynamicity, and final overall objectives.

Paradoxically, the logic of knowledge

management is based on generating cash

through value creation process. These cash

flows have unique drivers in termof technology,

product quality, and customer’s loyalty.

Traditionally, business activities have been

considered as drivers and key sources of

accounting cash. The drivers of accounting

cash are growth of sales, exploitation of profit

margin, and tax percentage. However, the other

group of drivers is related to investment in

working capital and fixed capital. In

consequence of such fact, the reporting format

and structure of statement of cash flows has

become meaningless for managing knowledge

cash (See Table-II). The knowledge cash flows

have different generation drivers which require

re-consideration for sources to provide more

reliable and relevant information. The logic of

innovation process clearly highlights a gap

exists between accounting capital and

knowledge capital (Atkeson and Kehoe, 2005).

The logic of knowledge as a source of cash is

resulted from the nature of knowledge as an

engine of value for customer base which

creates loyalty. As already noted knowledge

cash is a result of the successful value creation

process and survive of knowledge companies.

Unlike the traditional change in cash,

calculating free cash flows is more matching

the dynamic of knowledge process. The

philosophy of free cash flows highlights the

fact that innovation is the only business for

knowledge companies to survive. Therefore,

free cash flows match knowledge cash earned

with knowledge cash invested. Accounting for

knowledge cash is less about individual or

collective sales and costs and more about

investment

and

returns.

Knowledge

investments are mainly intended to acquire

future earning power through innovation. Thus,

knowledge assets are defined as expenditures

made with the intention of earning future

revenue power through enhanced technology

and knowledge process (Austin, 2007). Under

the knowledge situation, the logic is totally

different with varied business rules in terms of

engines and ways to create the knowledge

profit. In the technical sense, the intensive use

of information technology has increased the

agility and reduced the accounting assets

through the integration with suppliers. Cash

and sources to produce this important asset, is

one of these issues that used to shape the

accounting against knowledge. This paradox

has been generated from the difference between

accounting cash and knowledge cash.

Knowledge is a critical enabler of cash through

technology as key enablers of innovation. This

reciprocal cycle has significantly affected the

items of working capital to leverage value

creation and streamline cash flows. Then,

increase the probabilities of continuity and

survival of knowledge businesses (Holsapple,

2003). The unique mechanism of knowledge

business model has replaced physical capital

by the high level of visibility and transmission

of information (See Table-II). Accordingly, the

overhead has been reduced by shifting the

responsibility for managing and replenishing

inventory to vendors. Further, the intensive use

of e-commerce technologies has agile accounts