Intellectual capital management

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Intellectual capital is the sum of all knowledge; implying that knowledge that exists at different levels both within or outside the organisation has to be taken into account for intellectual capital. [1] The intangible nature of many knowledge products and processes, in combination with the increasing importance of their value in corporate balance sheets leads to a growing interest in management of intellectual capital. Creating, shaping and updating the stock of intellectual capital requires the formulation of a strategic vision, which blends together all three dimensions of intellectual capital (Human, Structural and Relational Capital) within the organisational context through exploration and exploitation, measurement and disclosure. [2] Therefore, the organisational value of intellectual capital is developed via an ongoing and emergent process focused on the capability to leverage, develop and change the dimensions. [3] The management of intellectual capital is conceptualised as occurring via a multiple stage process, governed by an evolutionary logic. The intellectual capital management is defined as a cycle of four inter-related sets of practices: Strategic Alignment, Exploration and Exploitation, Measurement and Reporting of intellectual capitals. [4]

However, an extensive literature has found that one of the main risks for intellectual capital comes from inside the organizations. Employees have access to organizations’ confidential information and key technology and therefore tend to add risks if Procedural information security countermeasures (PCM) are not taken care of adequately. An example of good measure for robust intellectual capital management that could decrease insider risk is setting up education, training and awareness (SETA) programs. [5]

Intellectual capital plays an important role in generating value for companies, as well as for the global economy. With the understanding of the value of the intellectual capital, companies have developed completely new ways to manage existing knowledge. This had has many strategic implications for organizations business operations. The strategic role of the intellectual assets is therefore constantly growing and organizations are looking for more effective intellectual capital management practices. Because of importance of intellectual capital, nowadays we are talking about knowledge workers who are constantly modifying, utilizing and creating new knowledge to add value to the operations of companies. [6] Therefore, it can be said that the management of intellectual capital is a significant factor in organizations value creation. Sometimes intellectual capital is also associated with the term knowledge management. Researches have tried to find out the connection between these terms. [7]

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Related Research Articles

Human capital or human assets is a concept used by economists to designate personal attributes considered useful in the production process. It encompasses employee knowledge, skills, know-how, good health, and education. Human capital has a substantial impact on individual earnings. Research indicates that human capital investments have high economic returns throughout childhood and young adulthood.

Intellectual capital is the result of mental processes that form a set of intangible objects that can be used in economic activity and bring income to its owner (organization), covering the competencies of its people, the value relating to its relationships, and everything that is left when the employees go home, of which intellectual property (IP) is but one component. It is the sum of everything everybody in a company knows that gives it a competitive edge. The term is used in academia in an attempt to account for the value of intangible assets not listed explicitly on a company's balance sheets. On a national level, intellectual capital refers to national intangible capital (NIC).

<span class="mw-page-title-main">Knowledge management</span> Process of creating, sharing, using and managing the knowledge and information of an organization

Knowledge management (KM) is the collection of methods relating to creating, sharing, using and managing the knowledge and information of an organization. It refers to a multidisciplinary approach to achieve organizational objectives by making the best use of knowledge.

The knowledge economy, or knowledge-based economy, is an economic system in which the production of goods and services is based principally on knowledge-intensive activities that contribute to advancement in technical and scientific innovation. The key element of value is the greater dependence on human capital and intellectual property as the source of innovative ideas, information and practices. Organisations are required to capitalise on this "knowledge" in their production to stimulate and deepen the business development process. There is less reliance on physical input and natural resources. A knowledge-based economy relies on the crucial role of intangible assets within the organisations' settings in facilitating modern economic growth.

<span class="mw-page-title-main">Information management</span> Organisational activity concerning information lifecycle

Information management (IM) is the appropriate and optimized capture, storage, retrieval, and use of information. It may be personal information management or organizational. Information Management for organizations concerns a cycle of organizational activity: the acquisition of information from one or more sources, the custodianship and the distribution of that information to those who need it, and its ultimate disposal through archiving or deletion and extraction.

Process-based management is a management approach that views a business as a collection of processes, managed to achieve a desired result. Processes are managed and improved by the organisation for the purpose of achieving its vision, mission and core values. A clear correlation between processes and vision supports the company in planning strategies, structuring business and using sufficient resources to achieve long-term success.

Knowledge workers are workers whose main capital is knowledge. Examples include ICT professionals, physicians, pharmacists, architects, engineers, scientists, design thinkers, public accountants, lawyers, editors, and academics, whose job is to "think for a living".

Organizational effectiveness is a concept organizations use to gauge how effective they are at reaching intended outcomes. Organizational effectiveness is both a powerful and problematic term. The strength of it is that it may be used to critically evaluate and improve organisational activities. It's problematic since it means various things to different individuals. And there are other alternative methods for measuring organizational performance. Organizational effectiveness embodies the degree to which firms achieve the goals they have decided upon, a question that draws on several different factors. Among those are talent management, leadership development, organization design and structure, design of measurements and scorecards, implementation of change and transformation, deploying smart processes and smart technology to manage the firm's human capital and the formulation of the broader Human Resources agenda.

Intellectual property assets such as patents are the core of many organizations and transactions related to technology. Licenses and assignments of intellectual property rights are common operations in the technology markets, as well as the use of these types of assets as loan security. These uses give rise to the growing importance of financial valuation of intellectual property, since knowing the economic value of patents is a critical factor in order to define their trading conditions.

The following outline is provided as an overview of and topical guide to business management:

Knowledge entrepreneurship involves the exploitation, leveraging, and transformation of knowledge into valuable products, services, or ventures. It emphasizes the application and commercialization of knowledge in order to generate economic and social impact. Knowledge entrepreneurship is different from 'traditional' economic entrepreneurship in the sense that it does not aim to realize monetary profit, but it instead focuses on the opportunities of production (research) and knowledge improvement. It has been argued that knowledge entrepreneurship is a suitable form of entrepreneurship for not-for-profit educators, researchers and educational institutions. While generating economic value is important, knowledge entrepreneurship often aims to address social challenges and contribute to positive societal change.

<span class="mw-page-title-main">Sustainability accounting</span> A term of financial accounting

Sustainability accounting originated in the 1970s and is considered a subcategory of financial accounting that focuses on the disclosure of non-financial information about a firm's performance to external stakeholders, such as capital holders, creditors, and other authorities. Sustainability accounting represents the activities that have a direct impact on society, environment, and economic performance of an organisation. Sustainability accounting in managerial accounting contrasts with financial accounting in that managerial accounting is used for internal decision making and the creation of new policies that will have an effect on the organisation's performance at economic, ecological, and social level. Sustainability accounting is often used to generate value creation within an organisation.

A knowledge organization is a management idea, describing an organization in which people use systems and processes to generate, transform, manage, use, and transfer knowledge-based products and services to achieve organizational goals.

E-HRM is the planning, implementation and application of information technology for both networking and supporting at least two individual or collective actors in their shared performing of HR activities.

Business Relationship Management (BRM) is viewed as a philosophy, capability, discipline, and role to evolve culture, build partnerships, drive value, and satisfy purpose.

Structural capital is one of the three primary components of intellectual capital, and consists of the supportive infrastructure, processes, and databases of the organisation that enable human capital to function. Structural capital is owned by an organization and remains with an organization even when people leave. It includes: capabilities, routines, methods, procedures and methodologies embedded in organisation.

Relational capital is one of the three primary components of intellectual capital, and is the value inherent in a company's relationships with its customers, vendors, and other important constituencies. It also includes knowledge, capabilities, procedures and systems which are developed from relationships with external agents.

Exit planning is the preparation for the exit of an entrepreneur from his company to maximize the enterprise value of the company in a mergers and acquisitions transaction and thus his shareholder value, although other non-financial objectives may be pursued including the transition of the company to the next generation, sale to employees or management, or other altruistic, non-financial objectives. Exit planning differs from succession planning in that the later is a sub-component of exit planning, and refers to the hiring, training and retention of a successor President/CEO of the company in a planned manner. Succession Planning is but one of the many considerations when conducting exit planning. Company owners commonly do not see their company from the standpoint of a potential buyer, and thus, ignore the strategic management of the company.

Process capital is the value to an enterprise which is derived from the techniques, procedures, and programs that implement and enhance the delivery of goods and services. Process capital is one of the three components of structural capital, itself a component of intellectual capital. Process capital can be seen as the value of processes to any entity, whether for profit or not-for profit, but is most commonly used in reference to for-profit entities.

Cognitive assets are tangible and intangible organizational assets that constitute sources of the cognition that is necessary for action coordination. These assets allow for the integrity and efficiency of the multiple conversions of individual knowledge into organizational knowledge.

References

  1. ↑ Youndt, Mark, Subramaniam, Mohan, & Snell, Scott (2004). Intellectual capital profiles: an examination of investments and returns. Journal of Management Studies, 41(2), 335–361.
  2. ↑ Khavandkar, Ehsan, Theodorakopoulos, Nicholas, Hart, Mark, & Preston, Jude (2016). Leading the Diffusion of Intellectual Capital Management Practices in Science Parks. In H. Shipton, P. Budhwar, P. Sparrow, & A. Brown (Eds.), Human Resource Management, Innovation and Performance (pp. 213–231). London: Palgrave Macmillan UK.
  3. ↑ Subramaniam, Mohan, & Youndt, Mark (2005). The Influence of Intellectual Capital on the Types of Innovative Capabilities Archived 2018-03-22 at the Wayback Machine . Academy of Management Journal, 48(3), 450–463.
  4. ↑ Khavand Kar, Jalil & Khavandkar, Ehsan (2013), "Intellectual Capital: Management, Development and Measurement Models", 3rd edition, Ministry of Science, Research and Technology Press.
  5. ↑ Kim, Hyungjin Lukas; Hovav, Anat; Han, Jinyoung (2019-12-03). "Protecting intellectual property from insider threats: A management information security intelligence perspective" . Journal of Intellectual Capital. 21 (2): 181–202. doi:10.1108/JIC-05-2019-0096. ISSN   1469-1930. S2CID   213669282.
  6. ↑ Kakabadse, Nada K., Kouzmin, Alexander, Kakabadse, Andrew (2001). From Tacit Knowledge to Knowledge Management: Leveraging Invisible Assets. Knowledge and Process Management, 8(3), 137-157.
  7. ↑ Hsu, I-Chieh, Sabherwal, Rajiv (2012). Relationship between Intellectual Capital and Knowledge Management: An Empirical Investigation. A Journal of the Decision Science Institute, 43(3), 489-524.
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