Intellectual capital‐in‐action and value creation. A case study of knowledge transformations in an innovation project
| DOI | https://doi.org/10.1108/14691930510611102 |
| Pages | 357-373 |
| Published date | 01 September 2005 |
| Date | 01 September 2005 |
| Author | Suresh Cuganesan |
| Subject Matter | Accounting & finance,HR & organizational behaviour,Information & knowledge management |
Intellectual capital-in-action and
value creation
A case study of knowledge transformations in
an innovation project
Suresh Cuganesan
Macquarie Graduate School of Management, Macquarie University, Sydney,
New South Wales, Australia
Abstract
Purpose – This paper investigates the inter-relationships between different components of
intellectual capital (IC) and value creation.
Design/methodology/approach – A single in-depth case-study of an innovation project within an
Australian financial services firm (“TransactCo”) is conducted.
Findings – The actual IC inter-relationships and transformations that occurred were different to
those originally envisaged by organisational participants, and reflected choices about IC deployment
and transformation. Considering IC-in-action, inter-relationships between different IC elements and
value creation were found to be pluralistic and temporally contingent.
Research limitations/implications – The limitations of the paper are as follows: the use of a
single case study design limits its generalisability; the empirical analyses was conducted at a
project-level and may not be transferable to other levels of analyses; and a narrow conception of value
was utilised, grounded in economic value and shareholder value terms. Extending the analyses
conducted to other settings represent future research opportunities.
Originality/value – Theoretically, in contrast to pri or empirical studies which depi ct IC
inter-relationships as primarily consisting of multiple relations of cause-and-effect in a one-to-one or
one-to-many manner, the narrative presented herein shows how IC resources transform each other,
often in a pluralistic and fluid manner. In addition, the paper calls for a perspective on IC-in-action.
Specifically, more narrative on the use of IC and its deployment should be incorporated within extant
models to highlight the contingent and precarious IC and value creation relationship. Firms that fail to
consider this adequately may face unintended value destruction consequences similar to those
observed at TransactCo.
Keywords Intellectualcapital, Value added, Innovation,Financial services
Paper type Research paper
Introduction
Within the discipline of intellectual capital (IC), conceptual refinement, methodology
consolidation and empirical research are seen as important elements of scholarly
development (Petty and Guthrie, 2000; Marr et al., 2003; Andriessen, 2004). One area
where there is a need for more detailed and empirically grounded research involves the
inter-relationships between the different components of IC and how these enable (or
impinge upon) value creation. Attempts to investigate these issues empirically are few
(for examples, see Peppard and Rylander, 2001; Skoog, 2003; Fernstrom et al., 2004;
Marr et al., 2004), and present a stark contrast to the many calls for further work in the
area (Petty and Guthrie, 2000; Collier, 2001; Mouritsen et al., 2001; Marr et al., 2003;
Skoog, 2003; Marr et al., 2004; Martin, 2004; Mouritsen, 2004).
The Emerald Research Register for this journal is available at The current issue and full text archive of this journal is available at
www.emeraldinsight.com/researchregister www.emeraldinsight.com/1469-1930.htm
Intellectual
capital-in-action
357
Journal of Intellectual Capital
Vol. 6 No. 3, 2005
pp. 357-373
qEmerald Group Publishing Limited
1469-1930
DOI 10.1108/14691930510611102
This paper helps to address the need for empirical investigations of the
inter-relationships between different IC elements and their value creation
consequences. Value here is defined in economic terms, and framed in terms of a
shareholder value perspective[1]. Specifically, the paper presents a micro case study of
one organisation’s struggle to create economic value through the development of an
e-business innovation and the associated management of its IC resources. In so doing,
the paper draws out the implications of its observations for the design of extant models
that claim to explicate IC and value creation, thus responding both to the “need also to
progress at a more granular, practically oriented level” (Guthrie and Petty, 2001, p. 374),
and to calls for the empirical testing of IC theories and frameworks (Marr and Chatzkel,
2004).
In relation to the extant literature on IC, this paper makes two main contributions.
First, the paper goes beyond the dominant empirical narrative in the IC literature of
multiple separate cause-and-effect relations, to show how IC resources transform each
other in a pluralistic and fluid manner. Second, the paper highlights the precarious and
contingent nature of IC inter-relationships and value creation. As such, it calls for a
space within IC and value creation models that depicts the conditions of possibility
which underpin those IC inter-relationships and the subsequent impacts on value
creation, inter-relationships that are currently presented in a relatively unproblematic
fashion. Practically, this might require more narrative on the business processes that
mobilise and transform IC resources into value creation consequences. Overall, a shift
towards an IC-in-action perspective is prescribed.
The remainder of the paper is organised as follows. The next section reviews the
prior literature examining IC and value creation. The third section of the paper
describes the research site and method utilised, along with the rationale for the latt er,
while the fourth section presents the results of the empirical investigation conducted.
The paper concludes with a synthesis of its main findings and the implications for both
research and practice.
IC transformations and value creation
The notion that developed economies are shifting towards services and innovative
technologies has been well established (Stewart, 1997; Sveiby, 1997; Petty and Guthrie,
2000). In these “new economies”, information and knowledge is seen as the principal
driver of value-creation and competitive advantage (Prahalad and Hamel, 1990; Zuboff,
1996), generating the increasingly critical invisible assets of contemporary
organizations (Itami, 1987) and making imperative the management, measurement
and reporting of IC. Concurrently, there is broad consensus that IC can be usefully
characterised in terms of a tripartite model comprising human capital, relational
capital and structural capital components as follows (Edvinsson and Malone, 1997;
Stewart, 1997; Sveiby, 1997; Guthrie and Petty, 2000)[2]:
.Human capital (employee competences) refers to the skill, training and education,
and experience and value characteristics of an organisation’s workforce.
.Relational capital (external structure) comprises relationships with customers
and suppliers, brand names, trademarks and reputation.
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