Relational capital

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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. [1] [2]

Contents

Overview

Relational capital is defined as all relationships - market relationships, power relationships and cooperation - established between firms, institutions and people, which stem from a strong sense of belonging and a highly developed capacity of cooperation typical of culturally similar people and institutions. Relational dependency may be vertical or horizontal, either up or downstream, shaping different types of cooperative, collaborative or coopetitive mechanisms in different ecosystem. [3] There are major conceptual differences between industrial and regional economists in their views towards relational capital. There have been research studies applying quantitative, empirical, and econometric techniques in an effort to verify the existence of relational capital and its importance to the innovation activity in firms. Proxies are found to represent the channels through which knowledge develops at the local level and therefore indirectly of relational capital. [4]

Leif Edvinsson, Director of Intellectual capital at Skandia, [5] may be considered the father of current thought on Intellectual Capital. Edvinsson and Malone (1997) and Brooking (1996) are pioneers in working with intellectual capital. [6] Customer capital is the strength and loyalty of customer relations. Customer satisfaction, repeat business, financial well-being, and price sensitivity may be used as indicators of customer capital. [7] The notion that customer capital is separate from human and structural capital indicates its central importance to an organization's worth. The relationship with customers is distinct from other relationships either within or outside an organization. Relational Capital or Customer Capital is the strength and loyalty of customer relationships. [8] [9]

See also

Related Research Articles

Customer relationship management (CRM) is a process in which a business or other organization administers its interactions with customers, typically using data analysis to study large amounts of information.

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">Business model</span> Rationale of how an organization operates

A business model describes how an organization creates, delivers, and captures value, in economic, social, cultural or other contexts. The process of business model construction and modification is also called business model innovation and forms a part of business strategy.

<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.

<span class="mw-page-title-main">Strategic partnership</span>

A strategic partnership is a relationship between two commercial enterprises, usually formalized by one or more business contracts. A strategic partnership will usually fall short of a legal partnership entity, agency, or corporate affiliate relationship. Strategic partnerships can take on various forms from shake hand agreements, contractual cooperation's all the way to equity alliances, either the formation of a joint venture or cross-holdings in each other.

<span class="mw-page-title-main">Brand loyalty</span> Marketing term for a consumers emotional attachment to a given brand

In marketing, brand loyalty describes a consumer's positive feelings towards a brand, and their dedication to purchasing the brand's products and/or services repeatedly, regardless of deficiencies, a competitor's actions, or changes in the environment. It can also be demonstrated with other behaviors such as positive word-of-mouth advocacy. Corporate brand loyalty is where an individual buys products from the same manufacturer repeatedly and without wavering, rather than from other suppliers. Loyalty implies dedication and should not be confused with habit, its less-than-emotional engagement and commitment. Businesses whose financial and ethical values rest in large part on their brand loyalty are said to use the loyalty business model.

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. 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 within the organisational context through exploration and exploitation, measurement and disclosure. 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. 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.

The knowledge-based theory of the firm, or knowledge-based view (KBV), considers knowledge as an essentially important, scarce, and valuable resource in a firm. According to the knowledge-based theory of the firm, the possession of knowledge-based resources, known as intellectual capital, is essential in dynamic business environments. These resources contribute to lower costs, foster innovation and creativity, improve efficiencies, and deliver customer benefits. Collectively, they are considered key drivers of overall organizational performance. The proponents of the theory argue, that because knowledge-based resources are usually complex and difficult to imitate, different sources of knowledge and intellectual capital can be seen as the main sources for a sustainable competitive advantage.

A knowledge market is a mechanism for distributing knowledge resources. There are two views on knowledge and how knowledge markets can function. One view uses a legal construct of intellectual property to make knowledge a typical scarce resource, so the traditional commodity market mechanism can be applied directly to distribute it. An alternative model is based on treating knowledge as a public good and hence encouraging free sharing of knowledge. This is often referred to as attention economy. Currently there is no consensus among researchers on relative merits of these two approaches.

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

Customer retention refers to the ability of a company or product to retain its customers over some specified period. High customer retention means customers of the product or business tend to return to, continue to buy or in some other way not defect to another product or business, or to non-use entirely. Selling organizations generally attempt to reduce customer defections. Customer retention starts with the first contact an organization has with a customer and continues throughout the entire lifetime of a relationship and successful retention efforts take this entire lifecycle into account. A company's ability to attract and retain new customers is related not only to its product or services, but also to the way it services its existing customers, the value the customers actually perceive as a result of utilizing the solutions, and the reputation it creates within and across the marketplace.

Innovation management is a combination of the management of innovation processes, and change management. It refers to product, business process, marketing and organizational innovation. Innovation management is the subject of ISO 56000 series standards being developed by ISO TC 279.

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.

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.

Organizational capital is the value to an enterprise which is derived from organization philosophy and systems which leverage the organization's capability in delivering goods or services.

Leif Edvinsson is a Swedish organizational theorist, Professor at the University of Lund in Sweden and consultant, known for his work on intellectual capital. and knowledge management.

National intangible capital (NIC) performance for 59 countries 2014 as measured by the ELSS (Edvinsson-Lin-Ståhle-Ståhle) methodology for measuring stock of national intangible capital, economic impacts and efficiency of NIC: Research is supported as an initiative by The New Club of Paris.

Network Orchestrator Companies are defined as:

... companies [that] create a network of peers in which the participants interact and share in the value creation. They may sell products or services, build relationships, share advice, give reviews, collaborate, co-create and more. Examples include eBay, Red Hat, Visa, Uber, Tripadvisor, and Alibaba.

The ISO 56000 is a family of standards designed to provide a framework for organizations to implement, maintain and improve innovation management systems.

References

  1. 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.
  2. Subramaniam, Mohan, & Youndt, Mark (2005). The Influence of Intellectual Capital on the Types of Innovative Capabilities. Academy of Management Journal, 48(3), 450–463.
  3. Khavand Kar, Jalil & Khavandkar, Ehsan (2013), "Intellectual Capital: Management, Development and Measurement Models", 3rd edition, Ministry of Science, Research and Technology Press.
  4. Capello, Roberta; Alessandra Faggian (2005), "Collective learning and relational capital in local innovation processes", Regional Studies, 39 (1): 75–87, doi:10.1080/0034340052000320851, S2CID   154549026
  5. Skandia (1994), "Visualizing Intellectual capital in Skandia", Supplement to Skandia’s 1994 Annual Report.
  6. Luthy, David H. "Intellectual capital and its measurement." Proceedings of the Asian Pacific Interdisciplinary Research in Accounting Conference (APIRA), Osaka, Japan. Cambridge University Press, 1998. p. 4
  7. Luthy, David H. "Intellectual capital and its measurement." Proceedings of the Asian Pacific Interdisciplinary Research in Accounting Conference (APIRA), Osaka, Japan. Cambridge University Press, 1998., p. 5
  8. Edvinsson, Leif and Michael S. Malone (1997), Intellectual Capital: Realizing Your Company’s True Value by Finding Its Hidden Roots, HarperCollins Publishers, Inc., New York.
  9. Luthy, David H. "Intellectual capital and its measurement." Proceedings of the Asian Pacific Interdisciplinary Research in Accounting Conference (APIRA), Osaka, Japan. Cambridge University Press, 1998.