Internal capital market (IKM)

Unter einem internen Kapitalmärkten wird die Gesamtheit aller unternehmensinternen Systeme und Verfahrensweisen für die Zuweisung (Allocation) von Cashflows auf verschiedene Projekte, Entwicklungsaktivitäten und Geschäftsbereiche verstanden, sofern diese marktnah gestaltet sind.
Resources are allocated in organizations or in communities according to the most varied of criteria: according to the age or rank of the applicant, according to need, according to social popularity, according to domestic political position and power, or according to the degree to which specified criteria (key figures) are met. They are all practiced in companies. Domestic political power plays a particularly important role, which is why many people working in organizations try to gain power. Equally important for the allocation of resources in practice is the question of the extent to which the application in question promises a profitable use of the funds, which is, however, assessed from the point of view of the criteria and standards set above (application form, key figures).

The point, however, is that both recognized positions of power and the standards set above tend to be rigid, which is why the new and innovative are often overlooked in a changing world. Organizations in a moving environment therefore try to encourage bottom-up opinion-forming.

1. Bodies that apply for resource allocations should do a competition-like comparison with each other and not just prove to the higher authorities individually and one after the other that they meet the criteria specified above.

2. The comparison or competition creates its own criteria. That is why internal capital markets are also open to a change in goals. That is positive in a changing world.

3. However, it can be seen that with an IKM people play “with other people's money”. The positions that compete here are often department heads, committed only to their team and their own work, developments and ideas. Only rarely do they take into account the wishes of the external beneficiaries when competing for resources. Internal capital markets therefore have to be heavily regulated.
When designing an ICM, freedom must be granted on the one hand, and regulation or intervention is necessary on the other hand because the players bet other people's money and not their own.

What matters here is the balance between the requirements of higher authorities and regulation on the one hand and the free play of competition on the other. This balance determines whether an IKM improves the allocation of resources or not.

Empirisch ist festzustellen, daß in allen Finanzsystemen intern generierte Mittel den größten Betrag zur financing von Neuinvestitionen leisten. Bei der Gestaltung Interner Kapitalmärkte zeigt sich: Interne Märkte stoßen dort an ihre Grenzen, wo die Entstehungsgründe der Institution Unternehmung tangiert werden.

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Further explanations for the first letter I.