Innovation and the Value of Human Capital in a Collegiate Setting

Innovation and the Value of Human Capital in a Collegiate Setting

Rachel Erin Johnson (University of Wisconsin-Green Bay, USA)
DOI: 10.4018/978-1-4666-9652-5.ch012
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Abstract

This case study illustrates the value of intellectual capital measurement, specific to human capital and innovation capital within an academic unit at a University of Wisconsin System campus. Within the case study, the academic unit was audited for their innovation practices and then examined to identify the value of human capital on their front line employees. Innovation continues to be a crucial component within academia as well as organizations in general to provide a competitive advantage. Understanding the value front line employees brings to a non-profit organization in academia continues to be a growing concern for many Universities'. The case study contains three parts; an innovation audit, several models and formulas to understand the value of human capital within a particular academic unit, and an overall conclusion and recommendation will be given for the current academic unit at the University of Wisconsin System campus.
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Introduction

Knowledge-based organizations, such as universities, consider knowledge to be a critical factor for success (Chen & Chen, 2011). Organizations use knowledge management, the process of capturing, distributing, and effectively using knowledge (Koenig, 2012), as a key component to develop strategic assets to create value (Russ, Fineman, & Jones, 2010). To harbor knowledge, organizations can use intellectual capital to measure their knowledge-base (Chen, Zhu, & Yuan Xie, 2004). Intellectual capital measurement identifies future non-financial content, intangible resources and capabilities: human capital, customer satisfaction and innovation (Chen, et al., 2004).

Intellectual capital can be identified in four interrelated and independent elements to measure an organizations value; human capital, structural capital, innovation capital and customer capital (Chen, et al., 2004). Human capital includes factors such as employee’s knowledge, skill, capability and attitudes in fostering performance. Human capital is a primary element to perform intellectual capital measurement and is the foundation of intellectual capital (Chen, et al., 2004). All three capitals are affiliated to human capital. Structural capital is the mechanism and structure of an organization to support employees to optimize intellectual performance and overall business performance (Chen, et al., 2004). Structural capital is subject to human capital, once influenced by human capital, structural capital exists objectively independent of human capital (Chen, et al., 2004). Innovation capital is made with the combination of excellent employee, reasonable regulations, culture and technique (Chen, et al., 2004). Customer capital is directly related to an organization’s business performance. Customer capital relies on the support from human capital, structural capital and innovation capital. This case study will focus on two important aspects of intellectual capital; human capital and innovation capital.

Human capital and innovation capital are integral roles in measuring intellectual capital. Because of this, it is important to understand how knowledge management along with human capital management is relevant to assist in the creation of value consistent with organizational innovation and business strategy in industries across the world. Bradley Hall identifies the theory of human capital management as: “A system for improving the performance of those in critical roles- those with the biggest impact on corporate core competencies” (Hall, 2008, p. 4). Human capital management is emerging to comprehend the meaning and measurements of human capital within organizations. The knowledge of human capital management provides an organization opportunity to create core competencies over their competitors. Hall also states that, human capital management is successful when, “A company can state that ‘our people outperform competitors’ people’ in roles that add the most value to customers and shareholders. Success is not world-class talent; it is world-class performance” (Hall, 2008, p. 4). Yoshio Yanadori and Victor Cui (2013, p.1502) also state that, “Researchers are increasingly interested in the role of human capital management on innovation. This line of research views innovation as a result of knowledge management processes. That is, firms generate innovations by managing their knowledge resources, including knowledge possessed by individual employees.”

Within the topic of innovation, evidence shows that innovation alone does not guide an organization to being innovative, nor does a culture of innovation. Organizations must look at the key characteristics, qualities and values top leadership encompasses within an innovative organization. Also, an organization must develop an innovative culture following all or some of the key factors, principles and functions of organizational culture for innovation.

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