- 26/11/2012
- Posted by: essay
- Category: Free essays
Intellectual Capital
in the conditions of knowledge-based economy
Introduction
The topic of our research is intellectual capital within the frames of knowledge management. In the contemporary understanding, intellectual capital is a clear, unambiguous, transmitted knowledge of an organization, which can be converted into value. The definition of intellectual capital may be formulated differently, depending on what aspect of it is being considered. Generally, intellectual capital is knowledge, skills and production experience of concrete people (human assets) and intangible assets including patents, databases, software, trademarks, etc., which are used productively in order to maximize profits and other economic and technical results.
Intellectual assets exist in various forms, and their effect is limited only by the ability of people to use them. Management capabilities of human intelligence and converting it into useful products and services become a critical competency in today’s business. Application of knowledge for providing competitiveness becomes more and more important in the organizational strategy. Thus, we observe the increasing interest towards the notions of intellectual capital, creativity, innovation and organizational learning. The answer to the questions about the possibilities of intellectual capital requires detailed study of the structure of knowledge and methods of its use, which also provides an understanding of existing and potential opportunities for the company. Further these issues are studied in the prism of researches of Steenkamp and Kashyap (2010), and Hussi (2004), who also base their concepts on the ideas of Rylander and Peppard (2003), Bontis et al. (1999), and Lam (2001).
| Title and reference of article | Hussi, T 2004, ‘Reconfiguring knowledge management – combining intellectual capital, intangible assets and knowledge creation’, Journal of Knowledge Management, vol. 8, no.2, pp.36-52. |
| Type of article | Discussion Article |
| Aim/Purpose of article | The author of the article claims that the terms of intellectual capital, intangible assets and knowledge creation have always been strongly linked concepts in the frames of knowledge management, so in his research, Hussi (2004) aims to show this parallel, as well as critically evaluate the definitions of these concepts as such. |
| Main Focus, Position | According to the author, in the new post-industrial economy, the activities of mankind have not changed, unlike the technological ability to use the ability to process and understand symbols as a direct productive force distinguishing a human from other biological creatures, and now there are three dimensions in the understanding of intellectual capital: human capital, internal structures and external structures (Hussi 2004; Sveiby 1997). Today, the functions of the economy lie in creating wealth, able to meet the material needs of people, and to create such wealth, people use the resource they possess. In order to indicate the diversity of these resources in a modern economy, the researchers use the concept of value, wealth, benefit, and profit-making (Lam 2000; Lev 2001). |
| Conclusion | Hussi comes to the conclusion that the economic results are still the major indicator of the effectiveness of intellectual capital and involve the obtainment of various forms of economic, social, political or environmental benefit or new values on the basis of this capital. Under the conditions of economy whose goal is to maximize profits, this cost takes the form of additional revenue generated by intellectual capital. As a result, Hussi works out a reconfigured model of knowledge management. |
| Significance of article in relation to: other articles, your topic or prior research | Hussi develops an integrated approach to understanding the concepts of intellectual capital, intangible assets and knowledge creation in the theory of knowledge management, which helps make relations between these concepts clear in further research. An integrated approach to the issues of intellectual capital is also discussed in the research of Lam (2000). |
| Limitations of article, e.g. location, industry, focus | In epistemological terms, the result of using such a structure is the examination of only three aspects of intellectual capital by Hussi (2004): a) communication – the organization of the transfer of existing knowledge, including the development of information technologies; b) financial – investment in science; and c) legal – relating to the protection of human ownership of intellectual assets. The author also doesn’t develop deeply his idea on measuring intellectual capital and intangible assets, but only marks the possible methods that could be used for these aims, in particular relying on Sveiby (1997), Sullivan (2000), and Lev (2001). |
| Title and reference of article | Lam, A 2000, ‘Tacit knowledge, organisational learning and societal institutions: an integrated framework’, Organization Studies, vol. 21, no. 3, pp. 487-513. |
| Type of article | Discussion Article |
| Aim/Purpose of article | In this article the author aims to study the significance of tacit knowledge within the fames of organizational learning and innovation, trying to form a conceptual structure uniting micro-Level learning activities with organizational forms and macro-level societal institutions. |
| Main Focus, Position | Stating that dominant knowledge types are interrelated with organizational forms, Lam (2000) shows that the importance of tacit knowledge in a knowledge-based company and the method of its use depend on broader institutional context. The paper demonstrates interaction of cognitive, organizational and societal levels which define companies’ learning and innovative capabilities. The article makes an effort to unite different viewpoints on this issue into single structure. |
| Conclusion | The author comes to the conclusion that studied learning patterns and knowledge configurations can’t be separated from the existing organizational institutions and forms. Lam also develops a 4-fold typology, illustrating the logic of institutionalized variation in organizational learning. |
| Significance of article in relation to: other articles, your topic or prior research | Lam’s typology could be useful for studying existing learning patterns in different countries. The author also identifies the clear link between intangible assets and results of production, basing on Marsden’s (1986) theory of the firm, which could help visually assess the contribution of intangible assets in the manufacturing process and incorporate them into strategic and operational management of the enterprise. |
| Limitations of article, e.g. location, industry, focus | In our opinion, Lam greatly simplifies, but at the same time reduces the value of such an ontological model as intellectual capital, since it is not possible to investigate the mechanisms of generating economic performance and reproduction of intellectual capital.
Simultaneously, the offered theory is a deterministic model, while the external environment and most large firms are stochastic systems and in accordance with the cybernetic law of requisite variety, such a model may be useful only for static analysis of individual situations, as a company which hasn’t got necessary level of diversity and stochastic properties, cannot survive in the real market economy. Thus, this ontological model of economy based on knowledge reduces it to the plane of innovation economy, with the only form of the increment value (obtaining property) in the form of new technical results. |
| Title and reference of article | Steenkamp, N & Kashyap, V 2010, ‘Importance and contribution of intangible assets: SME managers’ perceptions’, Journal of Intellectual Capital, vol. 11, no. 3, pp. 368 – 390. |
| Type of article | Research Article |
| Aim/Purpose of article | This paper aims to empirically prove the importance of intellectual capital in small and medium enterprises (SMEs). |
| Sample, location, method of data collection and analysis | The research covers New Zealand SMEs and analyses the role of intangible assets in the local businesses. The data were collected by means of postal questionnaire. The sample was formed on the basis of theAucklandregion, using national database, and included 300 firms working in 28 different categories classified in the database. |
| Findings | The results of the investigation prove the significance of intellectual capital for the success of the SMEs, outlining particularly such its components as customer satisfaction, customer loyalty, corporate reputation, product reputation, employee know-how, etc. Like Hussi (2004), Steenkamp and Kashyap (2010) draw out 3 levels of intellectual capital importance – human, external and internal capital.
In this connection, for system analysis of pragmatic aspects of a firm’s intellectual capital the authors take the development of epistemological and ontological models of the system “intellectual capital – results generation – value” and its subsystems, which take into account the stochastic nature of processes occurring in the firm and the external environment and determine the efficiency of production. Therefore, the idealized object of the theory of the knowledge-based company is the system “intellectual capital – results generation – value”, and its object of research is the generation of profits and the reproduction of the company’s intellectual capital. |
| Significance of article in relation to: other articles, your topic or prior research | The paper might be useful due to its identification of intellectual capital management as a significant business driver, as well as identification of intangible assets in general. In general, the lack of intellectual capital factor in the company’s theory reduces the adequacy and cognitive value of microeconomic models adopted on its basis. Consequently, in neo-economic conditions scientific knowledge gets a binary representation: epistemological one as a methodological tool-box of the company’s theory and ontological one as a production factor. In the epistemological aspect of the firm logical models of economic processes shaped within the theory of the firm are represented. Methodological basis of studies of ontology and epistemology of the firm consists of concepts of economic science, developing in its classical, institutional and evolutionary theories (Bontis et al. 1999; Rylander & Peppard 2003; Sullivan 2000). |
| Limitations of article, e.g. location, industry, focus | Out of 290 mailed questionnaires, the returned ones presented only 7 categories, thus, lot all the findings can be fully generalized for all the SMEs taking part in the research. |
| Title and reference of article | Rylander, A & Peppard, J 2003, ‘From implementing strategy to embodying strategy: linking strategy, identity and intellectual capital’, Journal of Intellectual Capital, vol. 4, no. 3, pp. 316-31. |
| Type of article | Discussion Article |
| Aim/Purpose of article | The paper aims to prove that intellectual capital provides the way to implementation of vision- and values-based strategy in the company’s resources. |
| Main Focus, Position | The authors state that human resources and intangible assets are the most essential resources for modern knowledge-based companies. Crafting strategies are gradually moving down in the rating of the tools that lead the company to success. The authors also introduce and analyze the specific strategy that integrates intellectual capital, strategy and identity, arguing that it is more relevant for knowledge-based companies operating in current competing environments. |
| Conclusion | According to Rylander & Peppard (2003), the increase of a company’s market value occurs due to the growth of liquidity of its tangible and intangible assets and yield. Competitive potential is an attribute the growth of which is accompanied by obtaining of other forms of value. This paper considers competitiveness as an independent form of value in the strategic decision-making situations where other forms of value are less pronounced in the results of economic activity. |
| Significance of article in relation to: other articles, your topic or prior research | The analysis of the structure of forms of value generated by intellectual capital allows the authors to use another taxonometric feature of binary classification of the forms of results of intellectual capital application – quality. Benefit quality can be either positive or negative (the latter include opportunistic costs). However, we can clearly see that opportunistic behavior of economic agents may decrease profits and market value of the firm. Therefore, the opportunistic nature of costs has become the object of epistemological and ontological studies of intellectual capital (Bontis et al 1999; Sveiby 1997; Edvinsson & Malone 1997). |
| Limitations of article, e.g. location, industry, focus | Though the authors believe their approach is to fill the theory-practice gap, in order to make it successful, they could also provide tools operationalizing theoretical implications and making them accessible for managers. |
| Title and reference of article | Bontis, N, Dragonetti, NC, Jacobsen, K, & Roos, G 1999, ‘The knowledge toolbox: a review of the tools available to measure and manage intangible resources’, European Management Journal, vol. 17, no. 4, pp. 391-402. |
| Type of article | Discussion Article |
| Aim/Purpose of article | The authors of the paper aim to analyze the most important methods and strategies of intangible assets management referred to as the knowledge toolbox. |
| Main Focus, Position | Authors’ analysis includes four most popular measurement systems: human resource accounting; economic value added; balanced scorecard; intellectual capital. The article contains thorough analysis of the strengths and weaknesses of such systems in order to improve their understanding among modern companies’ managers.
According to Bontis et al., the ontological structure of corporate knowledge is determined by the practical context of its application. Complex multilevel structure of corporate knowledge has necessitated the use of taxonomy for the classification and systematization of its elements. The following attributes of corporate knowledge are considered as taxonometric features: context ( includes joint group of basic scientific knowledge, methodologies and techniques: general science, and mathematical and economic, technological and system knowledge); goal ( includes special technological and economic knowledge, as well as supplemental information used in manufacturing processes and obtaining concrete results); level (includes the knowledge needed to address the strategic, operational and everyday problems of production). |
| Conclusion | The author seem to be consequent in their detailed analysis of each method and generally conclude that each particular company – taking into account the specificity of its activities and organizational construction – may independently determine its own system of indicators for the calculation of intellectual capacity and determination of a development strategy. In the interests of the company, in the aim of company’s sustainable development and, sometimes, in order to survive in the contemporary market, the company should be able to evaluate its own potential, and in the first place, intellectual potential, as well as to measure its opportunities in relation to the needs of the market. |
| Significance of article in relation to: other articles, your topic or prior research | Comparison of theoretical models describing semantic and the economic nature of the new values generated by intellectual capital (Edvinsson & Malone 1997) with the practical intellectual factors (Roos & Roos 1997) helps form the system reflecting the structural relationship between these subsystems. |
| Limitations of article, e.g. location, industry, focus | Possible limitations of the approach include the fact that authors factually use the descriptive technique to show advantages and disadvantages of different methods and finally state that it’s not possible to mark the universally best one, though actually describe the spheres and limits of applying each of the studied methods. |
Conclusion
Content analysis of publications in the field of knowledge and intellectual resources management (see Journal of Intellectual Capital, Knowledge and Process Management, Journal of Knowledge Management, Knowledge and Process Management Practices) in general shows that in the modern theory of knowledge -based economy the object of research is the structure “intellectual capital – scientific and technical progress”. This dichotomy in the epistemological aspect is not a system from the standpoint of systems theory, as it represents only the “input-output” structure. In this case, we only consider a substantive aspect of the intellectual capital (what is done and received) while procedural aspect (how it is done) – production of various economic, technical and other results, – forming a system “input-processor-output” is missing. Thereat, new technical solutions (innovation rent of scientific and technical progress) are actually considered as the only form of the results generated by the intellectual capital.
The abovementioned experts define the cost of intellectual capital as the difference between shareholder value of a company and the value of its net assets, which is very close in its meaning to the valuation of intangible capital in econometric studies, although there’s no full match here. The main idea of the concept of intellectual capital management is to create a transparent system for intellectual asset management.
Thus, intellectual assets of the company are seen as an integral part of the process of creating surplus value. In this regard, the intellectual capital of the company needs an effective management, as well as any other group of assets. Intellectual capital is considered in the analyzed articles as an integral component and involves the integrated management of all the components of the asset, and an attempt to manage individual intellectual assets in the isolation from others is seen as the method implying lower effectiveness.
Experts also claim that the main purpose of intellectual capital management is an intellectual provision of company’s business processes, continuous development and increase of the value of intellectual assets. The contemporary knowledge management logic also includes fundamentally new methods of financial management process of human capital: company’s business process is already formalized at the stage of business planning. Thus, the procedure for developing knowledge and skills can be calculated in measurable financial terms. As a result, it is possible to make prognosis on investment profit ratio in personnel training.
Bibliography
Bontis, N, Dragonetti, NC, Jacobsen, K, & Roos, G 1999, ‘The knowledge toolbox: a review of the tools available to measure and manage intangible resources’, European Management Journal, vol. 17, no. 4, pp. 391-402.
Edvinsson, L&Malone, MS1997, Intellectual Capital: Realizing Your Company’s True Value by Finding its Hidden Brainpower, Harper Business, NY.
Hussi, T 2004, ‘Reconfiguring knowledge management – combining intellectual capital, intangible assets and knowledge creation’, Journal of Knowledge Management, vol. 8, no.2, pp.36-52.
Lam, A 2000, ‘Tacit knowledge, organisational learning and societal institutions: an integrated framework’, Organization Studies, vol. 21, no. 3, pp. 487-513.
Lev, B 2001, Intangibles. Management, Measurement, and Reporting, Brookings Institution Press,Washington,DC.
Marsden, D 1986, The end of economic man,St Martin’s Press, NY.
Roos, G & Roos, J 1997, ‘Measuring your company’s intellectual performance’, Long Range Planning, vol. 30, no. 3, pp.413–426.
Rylander, A & Peppard, J 2003, ‘From implementing strategy to embodying strategy: linking strategy, identity and intellectual capital’, Journal of Intellectual Capital, vol. 4, no. 3, pp. 316-31.
Steenkamp, N & Kashyap, V 2010, ‘Importance and contribution of intangible assets: SME managers’ perceptions’, Journal of Intellectual Capital, vol. 11, no. 3, pp. 368 – 390.
Sullivan, P 2000, Value-Driven Intellectual Capital. How to Convert Intangible Corporate Assets into Market Value?, John Wiley, NY.
Sveiby, KE 1997, The New Organizational Wealth. Managing and Measuring Knowledge-Based Assets, Berret-Koehler, San-Francisco.
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