Assessing knowledge creation and intellectual capital in banking industry
| Published date | 19 January 2010 |
| Pages | 74-89 |
| Date | 19 January 2010 |
| DOI | https://doi.org/10.1108/14691931011013343 |
| Author | Kuang‐Hsun Shih,Chia‐Jung Chang,Binshan Lin |
| Subject Matter | Accounting & finance,HR & organizational behaviour,Information & knowledge management |
Assessing knowledge creation
and intellectual capital in banking
industry
Kuang-Hsun Shih
Department of Banking and Finance, Chinese Culture University,
Taipei, Taiwan
Chia-Jung Chang
FIOS R&D Centre, Performance Measurement Association, Taipei,
Taiwan, and
Binshan Lin
College of Business Administration, Louisiana State University in Shreveport,
Shreveport, Louisiana, USA
Abstract
Purpose – The purpose of this paper is to examine the empirical studies on knowledge creation and
intellectual capital (IC) to generalize the important factors concerning knowledge creation and IC of
banks. The major purpose is to explore the relationship between knowledge creation and IC through
the construction of the correlation patterns between these two elements.
Design/methodology/approach – This paper adopts the knowledge management (KM)
measurement to examine the formats of knowledge creation on evaluation of relationship between
different elements in the IC of banks by structural equation modeling.
Findings – The performance of knowledge creation has significant influence on the accumulation of
subsequent human capital. Cognitivists and connectivists are considered the main knowledge creators
in the banking industry. The performance of human capital exhibits significant influence on structural
capital and customer capital. The performance of customer capital reports significant influence on the
formation of structural capital.
Research limitations/implications – The ability to create knowledge is highly relevant to IC in
the banking industry. Companies should define their own robust mechanisms for knowledge creation
to improve their ability in knowledge creation. Knowledge creation in banks should focus on the
exchange and sharing of information. It is suggested that the usual approach adopted by banks is
brainstorming and workshops, and the connecting approach is team-oriented.
Practical implications – The managers in the banking industry should identify the ways to
cultivate in-depth contents of IC and have comprehensive development on IC to create differentiated
advantages and boost corporate competitiveness.
Originality/value – The importance of tangible assets is waning and has been gradually shifting to
knowledge and IC, and thus, KM has become an important strategy in corporate competition.
Organizationshave been redefinedas platformsthat can create knowledgeand accumulate intangible,IC.
Keywords Knowledge creation,Intellectual capital, Financial institutions,Financial services
Paper type Research paper
Introduction
Knowledge has become a powerful tool for corporate competition. Guthrie (2001)
suggested that successful companies do not gain benefits with only tangible assets,
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1469-1930.htm
JIC
11,1
74
Journal of Intellectual Capital
Vol. 11 No. 1, 2010
pp. 74-89
qEmerald Group Publishing Limited
1469-1930
DOI 10.1108/14691931011013343
and they mainly rely on access to intangible information and knowledge creation as
their major resources for success. The traditional concept of evaluating enterprise
value and performances with tangible assets has gradually given way to a focus on
intangible knowledge development and integration ability. Intangible knowledge
development and integration ability is a set of thorough management skills that can
develop and restructure human capital, structural capital, and customer capital of an
organization. With systematic integration, internalization, and the advantage of
knowledge benefits, companies are able to create core competitiveness. Wu (2002)
indicated that for knowledge-type companies, creation, accumulation, sharing, and
integration of knowledge are the momentum for the creation of corporate value and
sustainable operations. Creation, management, measurement, and evaluation of core
intellectual capital (IC) will be an important indicator of the value of corporate
competitiveness in the future.
Since the implementation of the Financial Holding Company Law in 2001, many
financial holding companies have been established. These companies can be divided
into three systems, securities and investments, banking, and insurance, as based
on their operations. Different from the manufacturing industries, the financial
service industry provides knowledge-based products or services. Although securities
and investments, banking, and insurance sectors are all under the financial
service industry, they have different industrial characteristics. The securities and
investment industry focuses on professional services provided by personnel; the
banking industry emphasizes on the flows of overall infrastructure; and the insurance
industry centers on customer relationship management (CRM). Although they have
differing focuses, the purpose is the same: the construction of IC for the company and
enhancement of market value. The financial industry has begun integra ting
professionals and market needs long ago to realize profits from financial knowledge
and risk management. The business model of banks is borrowing and lending capital
from/to all other indust ries by risk-return tra deoff decisions. Owing t o the
characteristics of the banking industry, it has to stay abreast of the business cycles
of all other industries. Meanwhile, the banking industry is highly regulated in its
operations. Over recent years, under the influence of financial liberalization and
internationalization, the banking industry has seen noticeable changes in their
business environment. This, combined with fierce competition, has created tremendous
pressures for banks. In an environment of high uncertainties and looming crises , banks
should not only more efficiently integrate their work force, financia l assets, and other
tangible assets, but also improve their ability in the management of IC to achieve
sustainable operations. For the banking industry, it is imperative as t o how to use
techniques in knowledge management (KM) to accumulate IC to cope with an
increasingly changing environment.
Most previous KM literatures addressing IC have focused on the correlati on
between IC and organizational performances (Chong and Lin, 2008; Ho, 2009). There
are relatively few discussions on the relationship between knowledge creation and IC,
and even fewer studies on such a relationship in the banking industry. The core
competitiveness of the banking industry is highly reliant on the ability of management
teams to systematically manage knowledge and experience. It also depends on whether
they are able to create sophisticated skills catering to the IC of their organization to
effectively manage risks and create profits.
Knowledge
creation and IC
75
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