Intellectual Capital in Organizations

Non-Financial Reports and Accounts

Patricia Ordoñez de Pablos, Leif Edvinsson

• Publisher: Routledge
• Year: 2014
• ISBN:
  9781317814726
• Edition: 1
• Topic: Business
• Subtopic: Knowledge Capital
• Index: Business

In a global competitive economic environment, resources that are scarce or irreplicable are a source of sustained competitive advantage for companies and organizations. Knowledge-based resources are a major and increasing driver of long term competitive advantage. Most accounting standards however do not allow for knowledge-based resource calculations, including the most important of these, intellectual capital. Intellectual capital is the collective knowledge, documented and otherwise, of individuals in an organization. In the absence of accounting standards to numerically evaluate intellectual capital, some institutions have devised their own reports and statements. But why should companies, universities, and research centers measure these resources? How are intellectual capital statements built? How does one set targets, and what indicators should they include?

This book reviews the development of the field of intellectual capital reporting, including core concepts, latest developments, the main components of intellectual capital, how a statement is built, and key indicators of each component. It further analyzes experiences from a variety of pioneering companies and institutions around the globe in measuring intellectual capital, including case studies from educational and research institutions, and provides crucial transnational comparisons. Authors Ordóñez de Pablos and Edvinsson examine the challenges and next steps for the harmonization of intellectual capital reports, consider the creation of a special international agency for intellectual capital reporting standards, and evaluate the weaknesses of current standards and how they might be overcome.

Part I
Knowledge-Based Resources as the Basis for Competitive Advantage for Countries and Regions

1 Identifying Knowledge-Based Factors Supporting Regional Development

Theoretical Frameworks and Systems of Indicators

Giovanni Schiuma and Antonio Lerro

1. Introduction

Academic and policy debate have widely recognized that knowledge-based factors increasingly play a fundamental role in territorial development dynamics (Boschma 2004; Budd and Hirmis 2004; Huggins and Izushi 2007; Lerro and Schiuma 2009; Pike et al. 2006) . This acknowledgement is mainly linked to the recognition that territorial systems’ success is no longer based only on “hard” productivity, but softer dimensions play a fundamental role as well (A sheim 1999; Dakhli and De Clercq 2004; Kitson et al. 2004; Maskell et al. 1998; Morgan 2004; Palma Lima and Ribeiro Carpinetti 2012; Valkokari et al. 2012).

Despite this wide acknowledgement, theory and practice highlight, there is still a lack of clear, coherent and shared frameworks for identifying, managing, assessing and reporting knowledge-based factors at a regional level.

In particular, two main issues emerge as relevant for academic and policy debate (Vieira et al. 2011). The first one deals with the objective difficulty in identifying and measuring knowledge-based factors within regional systems. The second one is related to the fact that although the quality and availability of data on different aspects of regional development have improved, there is still a significant lack of homogeneous and relevant data about the endowment and use of knowledge-based factors; moreover, there is a need to define and collect nonestablished data about knowledge sources in order to potentially explain the reasons behind the large differences in regional development patterns.

The aim of this chapter is to address these gaps. First, it briefly analyzes the role of the knowledge-based factors for regional development dynamics. Then, according to a knowledge-based interpretation of territorial strategic resources, the Knoware Tree framework identifies and classifies territorial knowledge-based factors, and the Knoware Dashboard framework drives the design of potential indicators and metrics to assess territorial knowledge-based factors. Finally, a set of key indicators for identifying and assessing the knowledge-based factors potentially supporting regional development paths is elaborated. We conclude the chapter by discussing the directions of future research.

2. Knowledge and Regional Development: Background

The first systematic attempts to study the relationships between knowledge and regional development were made by economic historians who wanted to understand why some territories managed to catch up with the richer ones while other territories continued to be poor (Gerschenkron 1962; Abramo-vitz 1986, 1994). The works of Gerschenkron and Abramovitz focused mainly on evidence from Europe and the U.S. However, from the 1970s onwards, several studies about the relevance of knowledge to development patterns emerged. Since the beginning of the 1970s, the most advanced economies in the world were undergoing structural changes, transforming from industrialized economies based on labor, tangible capital and material resources into economies based more and more on the creation, diffusion and exploitation of new knowledge (Bell 1973; Handy 1989; Mandel 2000). According to this perspective, different scholars highlighted the emergence of a so-called “knowledge-based economy” (D’Aveni 1995; Hitt et al. 1998). Specifically, the concept of a “knowledge-based economy” indicates a new phase of development in which technology, scientific knowledge and human resources represent the key strategic factors for the growth, and it is possible to identify a strict link among the learning processes, the innovation processes, the competitiveness and the economic development. At the same time, the climate of crisis in the manufacturing activities in most European countries, as well as in traditional policies to support economic development, determined a new interest in the local dimension of economic development. In turn, the emergence of a “knowledge-based economy” and the attention on models of locally based development brought about meaningful changes in the approaches to resources and the capabilities to activate and enhance value-creation dynamics. Accordingly, in the last decades, various theoretical and practical contributions have been produced, arguing that the more relevant factors to activate and support territorial development paths are more and more linked to the ownership and use of assets, resources and capabilities related—in a direct or indirect way—to the notion of knowledge.

By analyzing specifically the local systems literature, as well as territorial and regional development and competitiveness streams, several terms and concepts, which are frequently interchangeable due to ambiguous definitions and a juxtaposition of their meanings, have been coined to refer to and analyze territorial systems’ cognitive resources and their role in activating dynamics of growth (Lerro and Schiuma 2011; Moulaert and Sekia 2003). It is possible to state that many convergent or competitive academic currents have taken part in the debate, such as the Italian Industrial District School (Albino and Schiuma 2003; Becattini 1987; Schiuma 2000), the French stream of Innovative Milieux (Ratti 1992; Camagni 2002), the Learning Region stream (Cooke 1998; Morgan and Nauwelaer 1998). Other scholars have highlighted, although often in a confused way, the relevance of quality and skills of the labor force; the extent, depth and orientation of social networks and institutional forms; the range and quality of cultural facilities and assets; the presence of an innovative and creative class and the scale and quality of public infrastructure (Lerro and Schiuma 2008).

More recently, according to the concepts expressed by the strategic management research stream, such as resource-based view, dynamic capabilities, competence-based view and knowledge-based view, the economic and regional sciences streams have also paid attention to these issues (Morgan 2004; Pinch et al. 2003). For example, Maskell et al. (1998) argue that the only economic production factors not subjected to ubiquification are localized, sticky knowledge, including collective tacit as well as disembodied codified knowledge (Asheim 1999). Storper’s notion of “untraded interdependencies”—such as flows of tacit knowledge, technological spillovers, networks of trust and cooperation and local systems of norms and conventions—is also regarded as central to understanding the economic performance and the competitive advantage of a territorial system (Storper 1995). Carlsson and Jacobsson (1997) have underlined that the competitiveness of a region depends not only on the presence of a critical mass of qualified organizations within its boundaries, but also on its capacity to coordinate the actions of these organizations.

However, the observation that “soft” factors affect the process of economic development might also be taken as supporting the view that a broader, more systematic approach that takes such interactions into account is required. During the late 1990s, such concerns led to the development of a new systematic conceptualization to the study of territories’ abilities and goods to generate and profit from knowledge—the so-called “knowledge asset” notion (Marr and Schiuma 2001). Traditionally, knowledge assets are grouped into three large components: human capital, structural capital and social and relational capital (Lerro and Schiuma 2008, 2009). The first comprises essentially the know-how characterizing the different actors operating within the territorial system (Dakhli and De Clercq 2004). Structural capital includes all those tangible and intangible assets relevant for the development, acquisition, management and diffusion of knowledge (Lerro and Carlucci 2007; Lerro and Jacobone 2013). Indeed, although knowledge assets have been fundamentally considered intangible in nature, it is essential to recognize that tangible assets also incorporate knowledge. Tangible assets are knowledge artifacts. However, we recognize that the intensity of the knowledge incorporated is different from asset to asset. Here, we consider tangible-knowledge structural assets those that are highly knowledge-based artifacts and that significantly contribute to knowledge management. With regard to social and relational capital, attention has been paid to other kinds of infrastructures related to relationships systems among the stakeholders, local culture, history, attitudes, norms, values, behaviors, image and other cultural dimensions characterizing the territorial systems (Kitson et al. 2004; Iyer et al. 2005; Tura and Harmaakorpi 2005). In the next section, we will discuss this issue more in detail.

3. Modeling Knowledge-Based Factors: The Knoware Tree and the Knowledge Dashboard

In the last decade, most of the strategic literature has assumed that resources can be distinguished between traditional tangible resources and new, strategically valuable intangible resources. This distinction can be traced back to two fundamental microeconomic strategic approaches, that is, the resource-based view (RBV) and the competence-based view (CBV). Both approaches argue that institutions searching for a sustainable competitive position have to control and develop resources characterized by heterogeneity and immobility.

In particular, the RBV stresses that resources are of sustainable competitive advantage if they are hard to transfer and accumulate, inimitable, rare, not substitutable, idiosyncratic in nature, synergistic and not consumable because of their use (Barney 1991; Peteraf 1993). Along these lines, the CBV has focused attention on the relevance of core competencies, distinctive capabilities, absorptive capacity and dynamic capabilities as source of competitive advantage (Prahalad and Hamel 1990; Teece et al. 1997). These studies have resulted in an emphasis on the intangible resources instead of the more traditional tangible assets.

The KBV is a more comprehensive approach and argues that the critical source of growth and competitiveness is knowledge (Grant 1996, 1997). When adop...

Table of contents

• Cover Page
• Half Title page
• Series page
• Title Page
• Copyright Page
• Contents
• Figures
• Tables
• Series Editor Foreword
• Preface
• Part I Knowledge-Based Resources as the Basis for Competitive Advantage for Countries and Regions
• Part II The Importance of Measuring Knowledge-Based Resources
• Part III Intellectual Capital Reports in Europe
• Part IV Intellectual Capital Reports in Asian Institutions
• Part V Intellectual Capital in Latin America
• Part VI Asian versus Western Approaches to Intellectual Capital Reports
• Part VII Trends and Challenges for Intellectual Capital Reports
• List of Contributors
• Index