Intellectual capital: disentangling an enigmatic concept
| Pages | 136-159 |
| DOI | https://doi.org/10.1108/14691930610661827 |
| Published date | 01 April 2006 |
| Date | 01 April 2006 |
| Author | Juani Swart |
| Subject Matter | Accounting & finance,HR & organizational behaviour,Information & knowledge management |
Intellectual capital: disentangling
an enigmatic concept
Juani Swart
School of Management, University of Bath, Bath, UK
Abstract
Purpose – The purpose of this article is to review current literature on intellectual capital and its
second-tier sub-components with a view to developing an improved research framework and a
foundation for measures.
Design/methodology/approach – Refereed journal articles were selected from social sciences
citations index (SSCI) and business source premier with a time limit of ten years.
Findings – Clear definitions are developed for each sub-component of intellectual capital. This was
done after identifying, for each sub-component, the dimensions along which current definitions and
research differ. A research framework is developed, which emphasizes the interaction between
sub-components of intellectual capital.
Originality/value – The paper provides a clear integrated framework and measures of forms of
intellectual capital to guide and inform future research.
Keywords Intellectualcapital, Human capital, Social accounting
Paper type Literature review
Introduction
Intellectual capital (IC) has been considered by many, defined by some, understood by
a select few and formally valued by practically no one (Bontis, 1998). The growing
interest in IC coincides with the dawn of the knowledge society and the newly seen
importance of its knowledge workers (Porter, 1985). It is within this contex t that many
authors discuss the importance for firm survival and performance of human an d social
capital at the organisational level (Kogut and Zander, 1996; Pfeffer, 1994; Uzzi, 1996).
Furthermore, concepts such as intangible assets, embedded tacit routines, core
competence, knowledge creation and innovation take centre stage in the explanation of
the firm’s assets that continually create value over and above physical and financial
resources (Barney, 1991; Bowman and Ambrosini, 2000; Swart and Bowman, 2003;
Davenport, 1999; Polanyi, 1966; Ulrich, 1998). The combination and integration of these
concepts in explaining phenomena such as firm survival, performance, innovation and
competitive advantage has lead to a set of concepts that have often been grouped under
the umbrella of IC but on close inspection is found to have been defined and applied in
rather different ways.
The obliqueness of definitions that have been used in the theoretical development of
intellectual capital and its core components has also been fuelled by practitioner
interest (Brooking, 1996, Edvinsson and Sullivan, 1996, Saint-Onge, 1996). Indeed, the
challenge for academics is to frame the phenomenon using extant theories in order to
develop a more rigorous conceptualisation of this illusive intangible (Bontis, 1998).
A review of the literature on IC reveals a tendency to focus on some of its
sub-components in considerable detail, often combining theoretical strands such as
human capital theory (Becker, 1964), the resource-based view of the firm (Barney, 1991)
The current issue and full text archive of this journal is available at
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JIC
7,2
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Journal of Intellectual Capital
Vol. 7 No. 2, 2006
pp. 136-159
qEmerald Group Publishing Limited
1469-1930
DOI 10.1108/14691930610661827
and social capital theory (Burt, 1992; Uzzi, 1996; Granovetter, 1973). Although these
developments are most useful in enriching our understanding of the sub-components of
IC, they do not constitute clear frameworks of what intellectual capital is and how it
contributes to firm performance.
This article reviews the literature on IC from the viewpoint of its sub-components
and disentangles some of its key definitions. The key contribution of the article lies in
unpacking the definitions and measures of IC and its sub-components and in
disaggregating their interconnection. The paper also seeks to develop clarified
definitions of the sub-components of intellectual capital as part of an improved
framework for research. This analysis forms an important foundation for future
research on valuable, rare and inimitable assets.
Viewpoints on IC
Most of the literature on IC makes a set of claims that are related to the value and
intangible nature of this resource. The term was first introduced by Kenneth Galbraith
in 1969 (Bontis, 1998) who believed that IC was more than pure intellect but included
“intellectual action”. It is the move from “having” knowledge and skills to “using” the
knowledge and skills that is captured in a circuitous way in the literature. That is , the
“using” of knowledge implies that relationships and processes are needed to transform
knowledge into a product or service that is of value to the firm and its stakeholders. It
is also precisely due to this conversion/combination process, which takes us from
having knowledge (often referred to as human capital (HC)) to using knowledg e (IC)
that leads to diffuse definitions of IC. An analysis of the literature indicates that
confusion most frequently stems from using interchangeably the terms IC and human
capital.
The differencein the various definitions presentedlies in the level of analysis applied,
its temporal dimension and the qualitative nature of IC. Many authors regard IC purely
as an individual level construct akin to knowledgeand skills that individuals have (HC).
For example Ulrich (1998, p. 15) argues that intellectual capital lies with skilled
employees who are committed to business goals. That is, IC equals competence
multiplied by commitment. Here the sum of capitalat the employee level is presented as
the IC of the firm. Othersview this asset as functioning at the collective level and regard
it as a meta-competence. Rastogi (2002), for instance, views IC as a firm’s holistic
capacity or meta-capacity to meet the challenges and exploit opportunities in its
continual support of and search for value creation. On this view IC represent assets
interwoven throughthe fabric of the firm. A similar approach is used by Mouritsen et al.
(2002, p. 12) whoview IC as organisation-wide knowledge resourcesthat, in combination,
are constitutive for capabilities, making it possible for the organisation to take action.
Both sets of definitions (individual and collective levels of analysis) differ in their
temporal approach to IC. That is, some argue that IC is something that can create value
in the future, or has the potential to create value (Bouty, 2000; Keenan and Aggestam,
2001) whilst others argue that IC is central to firm performance because it is of value in
itself (it doesn’t have to be turned into something valuable). By way of illustration, on
the one hand Skaikh (2004) views IC as knowledge that can be converted into value or
intellectual material (knowledge, information, intellectual property and experience)
that can be used to create wealth. Another key definition which falls within this
category is that of Edvinsson (2000) who views IC as the future earning potential
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