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The Problems and Challenges of Researching Intellectual Capital

Copyright © 2011. 12 pages.
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DOI: 10.4018/978-1-60960-071-6.ch001
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MLA

Spender, JC. "The Problems and Challenges of Researching Intellectual Capital." Managing Knowledge Assets and Business Value Creation in Organizations: Measures and Dynamics. IGI Global, 2011. 1-12. Web. 26 Oct. 2014. doi:10.4018/978-1-60960-071-6.ch001

APA

Spender, J. (2011). The Problems and Challenges of Researching Intellectual Capital. In G. Schiuma (Ed.), Managing Knowledge Assets and Business Value Creation in Organizations: Measures and Dynamics (pp. 1-12). Hershey, PA: Business Science Reference. doi:10.4018/978-1-60960-071-6.ch001

Chicago

Spender, JC. "The Problems and Challenges of Researching Intellectual Capital." In Managing Knowledge Assets and Business Value Creation in Organizations: Measures and Dynamics, ed. Giovanni Schiuma, 1-12 (2011), accessed October 26, 2014. doi:10.4018/978-1-60960-071-6.ch001

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Abstract

The chapter presents an overview of the present state of thinking and research around intellectual capital (IC). I explore IC’s potential as a concept and/or a path towards improved organizational measurement and performance. I distinguish theorizing IC as an alternative form of capital that can be summed with tangible capital (TC) from thinking of IC as that which mediates the economic value of TC. This suggests two quite different IC-engaging theories of the firm. I conclude that IC is simply a metaphor for our experience of sometimes dealing successfully with Knightian uncertainty. If this view can be sustained it follows that there is no way of measuring IC and our community’s principal project - to correct our accounting methods’ failure to do this - is deeply misguided.
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Introduction

To situate IC1, many lead off with the statement that ‘knowledge’ has become the key to economic viability and vitality in our present circumstances. But why do we believe ‘knowledge’ has become so important, displacing other forms of capital as the focus for strategic analysis? As this volume’s authors indicate, there are two kinds of answer here - and they lead to very different interpretations of IC’s place in the firm and its management. There is considerable tension between the research programs implied.

The first answer is that it seems clear that the amount of IC, or rather the proportion of most firms’ total capital that is non-tangible, has increased markedly in recent decades. Economists have even tried to estimate this proportion. While we do not know the reasons for the rise for sure, we assume it is a result of technological change, the growing demand for services, the rising extent and complexity of global trade, the increased education necessary to participate in today’s economy, and so on. Examining Tobin’s Q scores might support this. It leads on to a discussion about the need to report the firm’s IC to shareholders, regulators and other stakeholders if the firm’s prospects are to be analyzed properly. It also leads on to a discussion of how IC is built up and how management, by focusing on their organization’s learning, might manage the acquisition and allocation of the firm’s IC as they do its tangible capital (TC).

The objective here is to correct or at least ameliorate our accounting methods’ failure to consider IC and the way this affects management’s practice. Overall we argue the world has changed, undercutting the relative strategic significance of TC, and that our accounting and management procedures have fallen behind. Our field’s goal is to help correct this and thereby help managers, investors and regulators regain a surer grasp of their firms’ strategic situation. The immediate challenge is to develop practical ways of identifying and measuring IC so that new accounting and management methodologies will have something to crunch. We can also hypothesize a firm’s success will be more closely related to the sum of its TC and IC rather than to its TC alone, and be likewise related to the degree of attention management pays to building and/or retaining the firm’s IC.

I believe this program has drawn most of our field’s attention to date. At the risk of offending those of my colleagues who work on this program, I feel that after its initial successes - given that its mere specification attracted the attention of a wide range of managers, regulators, government officials, and others - it has yet to deliver much of value to managers, accountants, or investment analysts beyond the guidelines we find, for instance, in the Meritum, German Federal Ministry or DMTI documents. These are not trifling achievements, of course, and should be well regarded. But as several of our authors note, while they are widely accepted they are little used.

A second kind of answer focuses more directly on - and problematizes - matters the first answer takes for granted. These revolve around the implicit theory of the firm and its value-generating processes. The first answer simply presumes the strategic importance of IC. The firm is then the sum of its differing capitals, modeled as ∑(TC+IC). Indeed, many authors define the firm as a ‘bundle’ of resources. But we also know that mere possession of capital - whether TC or IC - seldom explains sustainability or competitive advantage or any of those other terms we use to indicate success or failure. As with the maxim ‘it is not what you know, but who you know’, the second answer sees IC as a substance or process that moderates or mediates the application of TC. This means IC is not directly comparable to TC - in contrast to the first program’s ‘relative quantity’ argument. IC may be something of a different genus. Those who, like me, regard Penrose’s analysis as fundamental here will cite her distinction between ‘resources’ and ‘services’. But the same point can be made in many different ways. The craftsman finds a tool of value only because he knows how to use it; the tool and this knowledge are not of the same type. Those who lack the knowledge find the tool valueless. Note also that the tool’s ‘use value’ may be unrelated to its cost (market value).

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Complete Chapter List

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Table of Contents
Preface
Giovanni Schiuma
Chapter 1
JC Spender
The chapter presents an overview of the present state of thinking and research around intellectual capital (IC). I explore IC’s potential as a... Sample PDF
The Problems and Challenges of Researching Intellectual Capital
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Chapter 2
Giovanni Schiuma
The ability of an organisation to govern knowledge assets dynamics lies at the core of an organisation’s value creation capacity. A key challenge... Sample PDF
Managing and Measuring Knowledge Assets Dynamics for Business Value Creation in Organisations
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Chapter 3
Karim Moustaghfir, Giovanni Schiuma
Today’s business landscape is increasingly complex and turbulent, forcing firms to develop their capabilities in order to be able to face... Sample PDF
Knowledge Assets and Value Creation Dynamics
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Chapter 4
Yoshito Matsudaira
This chapter considers knowledge creation in relation to improvements on the production line in the manufacturing department of Nissan Motor Company... Sample PDF
Ethos as Enablers of Organisational Knowledge Creation
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Chapter 5
Daniela Carlucci, Giovanni Schiuma
Nowadays knowledge assets are widely recognized as organizational resources that play a pivotal role in company’s value creation. However the... Sample PDF
A Knowledge Assets Mapping Methodology to View Organizational Knowledge-Based Value Creation Dynamics
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Chapter 6
Dina Gray
Organisations are struggling to understand what benefits can be realised through the measurement of their knoweldge assets even though many... Sample PDF
Why Measure Knowledge Assets?: The Benefits for Organizations
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Chapter 7
Feng Gu, Baruch Lev
This chapter develops an economic approach to estimating the value of intangible assets that are not recorded on the firm’s balance sheet. The... Sample PDF
Intangible Assets: Measurement, Drivers, and Usefulness
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Chapter 8
Mark E. Nissen
Knowledge is key to sustainable competitive advantage, but different kinds of knowledge affect competitive advantage differently, and they exhibit... Sample PDF
Measuring Dynamic Knowledge Flows: Implications for Organizational Performance and Competitive Advantage
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Chapter 9
Aino Kianto
As more and more organizations have to compete in turbulently changing environments, the ability for continuous renewal, learning and innovation has... Sample PDF
ORCI: A Validated Method for Measuring Dynamic Intellectual Capital
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Chapter 10
Mariolina Longo, Matteo Mura
The purpose of this chapter in two-fold in that it seeks: (1) to develop an intellectual capital measurement system that specifically focuses on the... Sample PDF
Measuring Knowledge Assets within Organizations: An Individual-Level Perspective
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Chapter 11
Harri Laihonen, Antti Lönnqvist
This chapter concentrates on exploring the knowledge asset value creation in the context of a specific type of business activity, services, and a... Sample PDF
How Knowledge Assets are Transformed into Value: The Case of Knowledge Flows and Service Productivity
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Chapter 12
Karim Moustaghfir
In an economy characterized by rapid change, continuous innovation and high intensity and dynamism of competition, the analysis of strategy and... Sample PDF
Knowledge Asset Dynamics and Firm Performance: Empirical Evidence from the IT Industry
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Chapter 13
Paula Kujansivu
The objective of this chapter is to understand why companies do not apply models that are commonly known in the IC literature i.e. to explain the... Sample PDF
IC Management: Explaining the Gap between Theory and Practice
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Chapter 14
Stephen McLaughlin
Many organizations struggling to capitalise on their knowledge assets tend to let their knowledge management systems emerge from existing IT systems... Sample PDF
Developing an effective Knowledge Management System
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Chapter 15
Robert Huggins, Maria Weir
The chapter focuses on how small KIBS (Knowledge-Intensive Business Service) firms manage their knowledge-based processes, or what are termed... Sample PDF
Managing Intellectual Assets in Small Knowledge-Intensive Organizations
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Chapter 16
Antonio Lerro, Giovanni Schiuma
The purpose of this chapter is to investigate the relevance of the knowledge assets as strategic resources and sources of territorial value creation... Sample PDF
Knowledge Assets and Value Creation: A Territory-Based Perspective
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